(10 March 2020)DAILY MARKET BRIEF 1: Equities, futures bounce higher as Trump steps in.
Most Asian equity indices rebounded following Monday’s bloodbath and US equity futures rallied as US President Donald Trump announced that the White House and Congress will meet on Tuesday to consider ‘very substantial’ economic relief measures, which may include a payroll tax cut.
The Dow and S&P500 futures surged 3.65% and 3.63% respectively, Nasdaq hopped 4%, following a terrible Monday session, where the S&P500 tumbled near 8%, the worst single day rout since the 2008 financial crisis.
The ASX 200 bounced past 3%, as WTI jumped almost 8%. Nikkei gained past 1%, with 2.28% rise in yen versus the US dollar.
China’s CSI 300 and Hang Seng index recovered near 2%.
The FTSE 100 is set for a 2% rebound past the 6100 mark at Tuesday’s open. BP and Royal Dutch Shell should bounce on the back of a jump in oil prices, after having erased 20% at yesterday’s rout.
Gold found support near 1650 per oz, as investors preferred keeping their gold holdings provided that the kneejerk rally in stocks didn’t necessarily signal the end of the sell-off.
The stock market rally has always been a key proof of success for Donald Trump, and what has been happening in the market recently may pull the carpet from under his feet during the critical year of presidential election. So, if the Federal Reserve’s (Fed) emergency action couldn’t give the market a jolt, then it wouldn’t be a surprise to see Donald Trump stepping in with massive fiscal measures to save the year.
But the market’s reaction to any announcement is yet to be seen. As we have mentioned in our earlier reports, high volatility is a sign of stress, regardless of the market direction. The VIX index, which is a gauge of investor panic, spiked to the highest in a decade. To us, a rebound in stock markets is not necessarily a hint for sustainable correction, the volatility should ease.
By Ipek Ozkardeskaya
