British pound & FTSE higher as the UK enters lockdown
The mood in markets is looking a little sturdier on Tuesday. The Fed has kitchen-sunk it, governments are making the tough decisions needed and Wuhan is showing some light at the end of the tunnel for the coronavirus.
US and European stock markets are setting up for a strong open. Bond yields are higher. The US dollar is lower, helping other currencies rebound. Gold and oil are both rising.
The British pound & the FTSE are higher as the UK enters lockdown. Investors are interpreting ‘stay home’ orders as a necessary evil.
It’s the only viable option to avoid a public health crisis. Whether it can practically work will play in the future direction in markets. We think how far-reaching the economic damage of the lockdown will be is still not fully priced into the pound. GBPUSD could still have a run at 1.10.
The Fed kitchen-slinked it. If you’re a believer of ‘don’t fight the Fed’, what was announced yesterday was a buy signal.
With the Federal Reserve kitchen-sinking, it has gone some way to calm markets. With a little time to review, there were some astonishing measures taken.
For us, there were three standout measures were Number 1: Open-ended QE, which means the Fed will just keep buying as they see fit with no restraint. Number 2: Lending directly to businesses completely bypassing high street banks in the process. Number 3: Corporate bond buying where the Fed can even buy corporate bond ETFs in the stock market.
The Unpassed US stimulus bill keeps getting bigger. There is still room for US politicians to undermine the market rebound. Both parties are fighting to take credit for the spending.
Adding to the improved mood is what seems to be an ever-rising figure for the US government stimulus. House Speaker Nancy Pelosi is now talking about a $2.5 billion. The Senate was apparently on the cusp of a deal but Trump told Republicans should not agree to Democrat stimulus measures.