Update 13-03-2020: Wobbly Dow rebound keeps European markets in the green at end of historic week
Though the European rebound has lasted as it has at any point in the last couple of weeks, its strength was undermined a tad by a US open that couldn’t quite decide how strong it wanted to be.
At points striking 22250, the Dow Jones seemed to settle into a 600 to 700 point increase as the open faded into the distance, keeping it around the 21800 mark. Though still a substantial rise, its slightly wobbly nature wasn’t the major confidence boost the European indices could have done with to ensure their own gains until the end of the session.
Nevertheless Europe did push ahead, if at a reduced pace compared to their midday peak. The FTSE was up 2.4% to 5350, with the DAX adding 1.7% and the CAC climbing 3.2%.
A historically terrible week, then, ends – hopefully – with a tentative rebound. What state the markets return in on Monday is unclear. Equities could really do with Trump’s stimulus plan materialising, just to reverse some of the damage done by the President’s shock travel ban.
Even if the weekend avoids another wave of alarming headlines – good luck with that – investors will likely wake up to some nasty numbers out of China on Monday morning. Industrial production is set to swing from 6.9% to -3.0%, with fixed asset investment down from 5.4% to -2.0%, and retail sales lurching from 8.0% to -4.0%. The slightest improvement on those worrisome estimates could prove to be crucial.
Update 12-03-2020: Equities crushed underfoot as US open causes investors scramble for the exit
A horrorshow US open turned an already very bad day into the kind of session that could go down as historic, if for all the wrong reasons.
It is hard to keep coming up with new metaphors for the scale of disaster facing the global markets. Equities are getting crushed under foot as investors flee to the fire exit, desperately scrambling about for safe havens that feel anything but.
The Dow Jones, already down close to 1500 points on Wednesday night, shed 1850 points as the bell rang on Wall Street, tanking all the way to 21700. This following Donald Trump’s bungled, widely derided and potentially economically catastrophic decision to ban travel from the 26 states that make up Europe’s Schengen Area.
The ECB’s stimulus package seemingly only made matters worse. Withstanding the pressure to cut rates to a fresh record low, the central bank announced an €120 billion expansion to its ongoing quantitative easing program, alongside new longer-term refinancing operations and cheap loans for banks to encourage lending to ’those affected most by the spread of the coronavirus’.
Firmly on the leash of the US indices, the European markets practically doubled their losses once trading got underway across the pond – and when you’re already down as much as 5% that takes you into pretty scary territory.
The CAC shed 10.2% as it tumbled to 4130, while the DAX plunged almost 1000 points to sink towards 9400, leaving it 4400 points off the all-time high struck exactly 3-weeks ago.
The FTSE, on track for its worst session since 1987, collapsed by 9.3%, the UK index now barely above 5300, a price it last struck in the middle of 2012.
Trying to find something worth buying, investors seemingly settled on the dollar. This left cable down 1.6%, forcing it back to a 5-month low $1.2607. Against the euro, meanwhile, the greenback rose 1.2%, forcing the single currency to a 10-day nadir of €1.1135.
Update 11-03-2020: Dow Jones falls more than 1000 points as investors lament lack of US stimulus plan
Echoing Tuesday’s trajectory, Europe’s early rebound proved to be unsustainable, especially in the face of a sharp reversal from the US.
In theory there was plenty for investors to cling onto this Wednesday. The European session started with a 0.5% interest rate cut from the Bank of England, taking them back to a record low of 0.25%. That was followed a few hours later by a coronavirus-focused budget from new Chancellor Rishi Sunak, one that saw the UK government announce a stimulus package worth £30 billion.
Yet once again investors caught a case of the fear. A sharp jump in the number of cases in the UK, from 373 to 456, didn’t help. Neither did the warning from director of the National Institute of Allergy and Infectious Diseases Anthony Fauci that any vaccine will be 18 months away.
Perhaps most damning in the eyes of the markets, Donald Trump is yet to deliver his emergency relief plan, and has failed to give any kind of timeline for its implementation if it gets through Congress.
This lack of movement, when other nations have started to take more drastic steps, contributed to a 1000 point-plus plunge from the Dow Jones, the index wiping out most of the rebound seen late on Tuesday.
The DAX and CAC quickly erased their own growth, though capped their losses at 0.5% and 0.3% respectively. The FTSE, on the other hand, dropped 1.4%, tumbling back below 5900 despite the various stimulus measures revealed in the UK this Wednesday.
Next up on Thursday is the ECB, Christine Lagarde and co. facing the first scheduled central bank meeting since the coronavirus took hold. The ECB finds itself in an unenviable position, caught between an outbreak rock and a negative interest rates hard place. And even if it does cut rates, investors have proven to be tough to please when it comes to stimulus announcements.