Financial markets have been very badly damaged on the one hand by the coronavirus epidemic, which has economic consequences and on the other hand by the collapse of the shale sector in the United States and the growing problems of companies financing shale companies.
All this led to the fact that in the first half of March 2020 we observed a collapse as in the worst times for world stock exchanges. In Poland, the decreases were the largest in history, and in the USA since 1987. All of this forced the Fed to send repo operations for a total of $ 1.5 trillion! Now expectations for the decision on March 18 are even higher. The entry of US stock indices into the bear market, since the fall from the high, exceeded 20 percent, may force the Fed to take huge action. The expectations are that the Federal Reserve after an emergency cut in interest rates at the beginning of this month by 50 basis points, may cut the range for the federal funds rate to 0.00-0.25 percent. These are the levels observed after the economic crisis more than a decade ago. It is also possible to divide this movement into two stages for March and April. Here with the possible use of clear forward guidance on the March meeting. What's more, the Fed may announce a new quantitative easing program or would definitely facilitate access to loans for small and medium-sized companies. In an extreme case, it may follow the Bank of Japan and decide to buy shares or ETFs directly. However, this is not expected.
The Fed will probably be the theme for the second half of March, but it is also worth paying attention to the decision of the Swiss National Bank. SNB has a huge problem with such a strengthening franc. However, the room for maneuver is limited and the issue of intervention in the franc market may be raised, which investors are paying close attention to.
The rest of the macroeconomic data remains overshadowed by the development of the coronavirus epidemic, and key publications may not appear until the turn of March and April when we will get readings about the economic situation in the third month of this year and then throughout the entire quarter.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
Trade this news from Conotoxia Ltd. platforms
Go to your account
