FXTM information and reviews
OctaFX information and reviews
XM information and reviews
FXCC information and reviews
Libertex information and reviews
HFM information and reviews

Global stimulus hopes pause equity market sell-off

2 March 2020

A new wave of policy stimulus is on the way. Central banks across the globe are re-opening their toolboxes with the BoJ announcing action to provide liquidity, the Fed projected to cut interest rates and most developed and emerging market monetary policymakers ready to act. Governments are also taking action with Italy announcing fiscal measures to mitigate the covid19 outbreak’s impact. 

So far, it seems the reassurance of combined monetary and fiscal measures are calming the financial markets. After initially dropping in early Asia trade, most equity markets are recovering from last week’s steep sell-off. China’s Shenzhen is up more than 3% at the time of writing, Japan’s Nikkei is 1% higher, UK’s FTSE 100 future added 2.3% and all three major US indices are indicating a higher open.

The positive mood is also reflected in oil prices with Brent rebounding 3% after hitting the lowest level since July 2017 earlier in the day. These moves in risk assets came despite China’s manufacturing purchasing managers index falling to record lows in February.

Can central banks fight off coronavirus?

Ever since the global financial crisis, central banks have played a decisive role in restoring investors’ confidence and markets are wondering whether monetary policy will be successful once again.  

In my opinion, the simple answer is no. The crisis we are currently facing is neither a financial nor a trade one. It’s a health crisis. Let’s assume the Fed cut interest rates to zero, the ECB moved deeper into negative territory and the BoJ resumed its asset purchase program. In addition, central banks became more creative with their Quantitative Easing programs. Will these measures encourage you to buy a new flat, a new car or even a new iPhone? Are you more confident in taking a vacation trip? Are you likely to consider expanding your business given the cheap liquidity? Most likely, the answer is no.

The current crisis facing the global economy is not due to a lack of cheap liquidity, but the absence of treatment to a virus that is spreading throughout the world, and no amount of monetary stimulus will return life to normal.

It’s almost impossible to know how much further risk assets may drop, but until we get evidence of the virus being contained, any upside may prove to be a dead cat bounce and the markets are likely to continue heading down.

Investors with cash may want to wait a little longer before they jump in, although markets may look attractive.


Share: Tweet this or Share on Facebook


Santa Rally: Your Christmas Gift From The Stock Market
Santa Rally: Your Christmas Gift From The Stock Market

Christmas is a religious holiday that has evolved into a cultural and commercial celebration with tales of Santa Claus delivering presents on a reindeer-pulled sleigh through the night sky...

7 Dec 2022

Citigroup heading for UAE
Citigroup heading for UAE

One of the largest and most famous banks in the world is Citigroup, headquartered in New York City… at least, for now. There have been some employee movements...

6 Dec 2022

XAU/USD upside appears more compelling ahead of US NFP
XAU/USD upside appears more compelling ahead of US NFP

Gold price consolidates recent gains around four-month high after crossing the key resistances. Cautious mood, US Dollar rebound allows XAU/USD bulls to take a breather...

2 Dec 2022

Oil’s correction in rumors about further production cuts by OPEC
Oil’s correction in rumors about further production cuts by OPEC

The price of Crude oil resumed the downward movement after failing to cross above the daily trendline which was valid since late June.The price only rebounded to the upside...

1 Dec 2022

The Downfall of Euro in 2022: the Analysis of its Reasons, the Current Situation, and the Objective Forecast
The Downfall of Euro in 2022: the Analysis of its Reasons, the Current Situation, and the Objective Forecast

Before getting down to analyzing why Euro reminds of a mafia victim in cement shoes falling off a Chicago bridge, allow us to open it up with a meme joke that best describes this whole ordeal...

30 Nov 2022

Is Boeing stock about to take off?
Is Boeing stock about to take off?

Boeing stock (BA) has been in free fall since March 2021, from $269 (USD) dropping to $121 at the end of September 2022. And then came a reversal, raising prices to over $175...

29 Nov 2022

Editors' Picks

FXCM information and reviews
ActivTrades information and reviews
RoboForex information and reviews
MultiBank Group information and reviews
MultiBank Group
FxPro information and reviews
Vantage information and reviews

© 2006-2022 Forex-Ratings.com

The usage of this website constitutes acceptance of the following legal information.
Any contracts of financial instruments offered to conclude bear high risks and may result in the full loss of the deposited funds. Prior to making transactions one should get acquainted with the risks to which they relate. All the information featured on the website (reviews, brokers' news, comments, analysis, quotes, forecasts or other information materials provided by Forex Ratings, as well as information provided by the partners), including graphical information about the forex companies, brokers and dealing desks, is intended solely for informational purposes, is not a means of advertising them, and doesn't imply direct instructions for investing. Forex Ratings shall not be liable for any loss, including unlimited loss of funds, which may arise directly or indirectly from the usage of this information. The editorial staff of the website does not bear any responsibility whatsoever for the content of the comments or reviews made by the site users about the forex companies. The entire responsibility for the contents rests with the commentators. Reprint of the materials is available only with the permission of the editorial staff.
We use cookies to improve your experience and to make your stay with us more comfortable. By using Forex-Ratings.com website you agree to the cookies policy.