Overnight on Wall Street: Wednesday 11/03/2020

After a dreadful Monday, the stock market recovered a semblance of normality as some governments rushed in to support the turmoil in the markets. Investors are being reassured that the combined effect of monetary and fiscal policy which are currently being considered will provide support to the global economy.

Nonetheless, it was a volatile trading session as investors try to gauge the effectiveness of the proposed plans. President Trump proposed a 0% payroll tax rate for the rest of the year and is considering federal assistance for the shale industry.

The purpose of the payroll tax is primarily to provide extra cash for people to spend. In the face of the coronavirus outbreak, how effective will a payroll tax be when people are inclined to stay home is subjective.

The stimulus plans brought a degree of calm on Wall Street:

• Dow Jones Average Industrial added 1,167 points or 4.9% to 25,018.
• S&P500 rose by 136 points or 4.94% at 2,882.
• Nasdaq Composite ended 394 points or 5% higher at 8,344.

Source: Bloomberg Terminal

Currency Markets

In the FX market, major currencies were weaker against the US dollar. The economic stimulus plan to counteract the impact of the virus on the US economy helped the greenback to reclaimed its popular demand status compared to other major currencies.

The US dollar index which tracks the performance of the greenback against a basket of currencies bolstered higher and rose above the 96 levels.

US Dollar Index (Daily Chart)

Source: GOMT4

As risk sentiment returned cautiously in the markets, demand for haven currencies took a step back. The US dollar rose by more than 350 pips on Tuesday.

USDJPY (Daily Chart)

Source: GOMT4

Oil & Gold

The oil price war between Russia and Saudi Arabia tanked the oil market. Russia’s reluctance to commit for more cuts is reportedly America. They are not willing to keep throwing lifelines to the shale oil companies.

Despite the tit-for-tat conflict whereby both parties fired back with boosting production, oil prices caught the rebound wave. As of writing, WTI and Brent Crude are trading in the vicinity of  $34 and $38 respectively.

UKOUSD and USOUSD (Hourly Chart)

Source: GO MT4

The rally in Gold has toned down as risk sentiment improved on Tuesday following news of stimulus plans. The XAUUSD pair retreated from earlier gains but remained in the elevated levels at $1,652.

XAUUSD (Weekly Chart)

Source: GO MT4

Key Upcoming Events

RBA’s Debelle Speech, Westpac Consumer Confidence, Home Loans, Investment Lending for Homes (Australia)
Manufacturing & Industrial Production, Gross Domestic Product and Budget Report (UK)
10-y Bond Auction (Germany)
Consumer Price Index and Monthly Budget Statement (US)

Disclaimer: Articles and videos from GO Markets analysts are based on their independent analysis. Views expressed are of their own and of a ‘general’ nature. Advice (if any) are not based on the reader’s personal objectives, financial situation or needs.  Readers should, therefore, consider how appropriate the advice (if any) is to their objectives, financial situation and needs, before acting on the advice.