The session of March 9, 2020 will go down in the history of financial markets. Oil prices have fallen by more than 20 percent, and the US stock indexes plunged as in times of financial crisis more than a decade ago. The Dow Jones index fell by 7.8 percent, the S&P 500 by 7.6 percent, and the Nasdaq by 7.3 percent.
There was also huge volatility on the currency market, especially on the USD/JPY pair, which fell by around 2 percent, and gold was close to 7-year highs. The situation reversed on Monday evening after the speech of US President Donald Trump. His administration plans to implement a package of activities that are designed to reduce the impact of the epidemic on employees and employers. The US president announced a reduction in payroll tax, unemployment insurance and children's food that rely on school nutrition programs if schools are closed. Further fiscal steps are also being taken in Japan. Finance minister Taro Aso announced that the government will launch a second aid package to stop the spread of infections and will focus on financial support for small businesses.
It seems that as a result of these announcements the markets have turned back. The USD/JPY rose more than 2 percent this morning, closing the gap after the weekend. Gold dropped from the highs and fell by more than 1 percent along with improved market sentiment. Futures contracts on stock market indices have turned green. In turn, we are seeing a sharp decline in the bond market.
After the actions of politicians, which seems more important in the current situation, investors are waiting for actions from central banks. Already this Thursday, the decision of the European Central Bank on interest rates will be published, and next week the Fed's decision will appear. Investors certainly want to know how central banks operate when employees of the Bank of Sweden and the ECB were tested positively for coronavirus. The week began with the markets earthquake, and the development of events, unfortunately, did not slow down.
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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