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Global Equities on Path for Worst Weekly Decline Since 2008

Global equities on decline

Fed QE measures and BOJ stimulus measures assure in a fresh wave of risk-on investor sentiment.

Summary: Asian market saw major indices and key equities close on a dovish note as economic woes stemming from the COVID-19 outbreak impact keep weighing down market bulls. The global stock market is seeing major indices and equities face its worst weekly decline since the 2008 financial crisis. However, the decline seems to have been contained to some extent as major central banks are continuing to flood respective markets with supportive measures in the form of fiscal measures and easing interest rates.

Headlines from the US yesterday stated that the US Federal Reserve has moved to restore liquidity in the world’s largest capital market by announcing open market operations to buy $.15 trillion of short term government bonds. This has helped unfreeze the US Treasury market while also providing a global market with a fresh source of liquidity to cope-up with disruptions caused by global pandemic woes.

European market opened on a positive note today with major indices seeing nearly 3% – 4% increase in value on cues from major central banks such as US Fed and Bank of Japan, which have finally begun to take definitive measures to support economic activity. 

Precious Metals: Rare metals are trading with positive bias today, albeit with a clear consolidative tone visible in price action. Earlier this week, profit booking activity from across the globe spiked as investors decided to cash-in on short term upsurge. This resulted in rare metals such as gold and silver losing a large chunk of their gains and price falling below key price levels.

Crude Oil: Crude oil price rebounded in the global market despite ongoing price wars as the US continues to show definitive proof of efforts to cut back on supply. Both Brent and WTI futures rose more than 5% in Asian and European sessions, but the weekly activity still shows a sharp drop in price action as WTI recorded a weekly decline of 20% while Brent recorded a decline of 23% for the week so far.

DXY: The US Dollar index rose above the 97 handle in the Pacific Asian market hours and holds firm against major global currencies. But it has failed to gain ground against emerging market currencies as the US Federal Reserve’s announcement to inject US$1.5 trillion into the market as a form of quantitative easing measure has caused mixed reactions in the forex market. 

On The Lookout:  Equity market is finally showing signs of stabilizing as major central banks have finally taken concrete measures in the form of rate easing and fiscal measures to support the economy as agreed during the G7 conference call in the recent past. However, it should be noted that ECB is yet to take any concrete measures and lacks a clear plan of action in terms of support measures while major European economies continue to suffer a major blow from escalating coronavirus outbreak.

In the US, House Speaker Nancy Pelosi has mentioned that Trump administration is very close in announcing policy measures to address the economic impact of coronavirus despite President Trump’s clear rejection of proposals submitted by democrats in the house. Trump called Democrat’s proposal an ideological wishlist with too many goodies that had nothing to do with the crisis at hand, while Trump administration has failed to come up with a clear proposal either.

President Trump’s outlook ahead of upcoming re-election continues to decline with each passing day as he blamed US CDC for lack of proper response measures and identification mechanisms to combat the COVID-19 outbreak despite firing US Pandemic Response team in 2018 as part of his cost-cutting measures and failure to reinstate or recreate the team till date. 

Trading Perspective: Major global currencies continue to trade with a bearish bias as USD gained strength on the Fed’s QE measures, but mixed reaction for the move by the Fed has helped major currencies from seeing sharp declines. US futures trading in the international market were positive in European market hours which along with influence from Fed move are likely to influence a rebound of major indices in trading session today. 

Please feel free to share your thoughts with us in the comments below. 

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