The turmoil in the stock markets are not getting smaller. After yesterday's excellent Wall Street session, another wave of declines came tonight. At the close of the session on Tuesday, March 10, the main stock indices in New York rose by around 5%, wiping out a significant portion of the black Monday decline. However, at present, futures contracts show a decline of around 3%.
The markets in Asia and Australia have also dived with increasing concerns about the effectiveness of Washington's stimulus package, which aims to alleviate the economic effects of the outbreak of the COVID-19. The Nikkei 225 index fell by 2.3%, the KOSPI index fell by 2.8%, and the S&P/ASX 200 decreased by 3.7%. To make it easier to imagine the effects of the epidemic on listed companies, i.e. producers and service providers, we will quote the results of today's survey of consumer confidence in Australia.
This index fell in February to a five-year low of 91.9 points. The publication shows the serious impact of a worsening coronavirus epidemic in the world. The sharpest decline in the index occurred in the subindex regarding economic conditions over the next 12 months, a decrease by 12.8%. In the category regarding the purchase of an important household item, a decrease of 4.3% was recorded. In this context, it is worth remembering that April 7 is the next RBA meeting. Given the clear risks facing the Australian economy over the next few months, the RBA may lower its main interest rate by another 25 basis points.
Meanwhile, on the forex currency market volatility does not cease before Thursday's decision of the European Central Bank, about which we will write more in tomorrow's comment. Expectations from the ECB are enormous, and the solutions that the bank could implement have a chance to help enterprises run their business and finance them in these difficult times. Investors and markets count on it. The EUR/USD exchange rate the day before ECB increases again, turning back after yesterday's correction in the area of 1.1250. After Thursday's ECB decision, the whole world of finance will be waiting for March 18 and the decision of the US Federal Reserve. It is also worth adding last-minute information – the Bank of England, apart from its regular meeting, decided to cut the main interest rate by 50 basis points to 0.25%. The pound reacted with a strong but short-term decline.
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.
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