There are rallies, and there are rallies – and boy did the Dow Jones RALLY on Monday night, posting its greatest ever points gain on the hopes that the world’s central banks can muster a co-ordinated response to the coronavirus this Tuesday.
It is a sign of just how bad the final week of February was that the Dow’s 1,297 point – or 5.1% – increase still leaves it almost 3,000 points off of where it was on Valentine’s Day.
Nevertheless, after a weekend full of stimulus-suggesting statements, news that the central bank chiefs and finance ministers of the G7 would be having a conference call to discuss an action plan – like a fiscal version of the Avengers – designed to combat the coronavirus crisis was enough to point the markets in the right direction.
It helped that the Reserve Bank of Australia has already given the G7 an example of what they can do, cutting its cash rate by 25 bps to a record low of 0.5%.
Following a thoroughly mixed Monday, the European indices shared in the Dow’s optimism, without getting quite as excited – after all, any enthusiasm will have been tempered by the WHO warning the world is in ‘uncharted territory’.
The FTSE, which was the best performer in Europe on Monday, added another 2.2%, pushing it back towards 6800. After missing out on yesterday rebound, the DAX rose 270 points to cross 12100, while the CAC added 2% as it neared 5450.
The danger, of course, is that if the world’s financial bigwigs fail to announce a coherent, co-ordinated plan of attack – and Reuters is reporting that the draft statement currently being worked on doesn’t call for such action – these gains could unravel double-quick.