By Deepta Bolaky
US benchmarks dramatically went into correction territory last week as the wider spread of the coronavirus created panic across the board. Money flows into the bond markets and US Treasuries yields dropped to record lows.
Monday saw an impressive turnaround in the US markets compared to Asian and European markets. The rebound was mostly driven by expectations that central banks will come to the rescue with rate cuts.
Even though rate cuts alone will probably not fix the fundamental issues, investors are looking for signs that central banks will take action now ahead of the second quarter. It is a wait-and-see mode to see if central bankers will give up to the ramping pressure for rate cuts.
Major US equity benchmarks traded mixed as the uncertainties around the virus are weighing on an already fragile global economy.
In the FX space, the attention was on central banks. It was reported that G7 finance chiefs will be holding a conference call on Tuesday to discuss measures to deal with the virus outbreak and its economic impact.
The US dollar was mostly weaker against major currencies as bets of Fed rate cuts weighed on its haven status. The Euro was among the best performers while the Pound emerged as the worst-performing G10 currencies.
Source: Bloomberg Terminal
The weakness in the US dollar helped other commodities related currencies to edge higher. Attention turns to Australia as the RBA will hold its interest rate decision on Tuesday which will act as a benchmark in determining what to expect from other major central banks.
Oil rebounded from recent lows as Russia shows a willingness to cooperate with OPEC+ members to support falling oil prices. As of writing, WTI and Brent Crude are trading in the vicinity of $47 and $52 respectively.
UKOUSD and USOUSD (Hourly Chart)
Source: GO MT4
Gold traded flat on Monday just below the psychological level of $1,600. Rate cut expectations have sparked an impressive rebound of around 4% on Wall Street, but risk sentiment remains fragile.
The XAUUSD pair erased the haven rush gains made due to the panic around the coronavirus but remained in the elevated levels seen in January because investors see the virus as another layer of uncertainty denting slowing global growth.
XAUUSD (Hourly Chart)
Source: Bloomberg Terminal
New Homes Sales, Building Permits, RBA Interest Rate Decision, Rate Statement and AiG Performance of Construction Index (Australia)
Gross Domestic Product (Switzerland)
Consumer Prices Index, and Unemployment Rate (Eurozone)
GDT Price Index and Building Permits (New Zealand)
|Wednesday 04 March 2020|
Indicative Index Dividends
Dividends are in Points
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