Turnaround Tuesday As Stimulus Comes Into Focus
Fiona Cincotta March 10, 2020 3:48 AM
Turnaround Tuesday or dead cat bounce? It depends on the global response.
The markets are stabilising after the biggest rout since the financial crisis on Monday. US futures are on the rise, US bond yields are picking up, Asian markets traded higher overnight, and crude has jumped 7% as it recovers from losses of 30% at its worst in the previous session.
In the cold light of day, yesterday’s frenzied selling looks very overdone. Today the market appears to be gaining some perspective following a sell off which saw the FTSE and the S&P briefly move into bear market territory. The million-dollar question is whether this is a dead cat bounce or the start of a more meaningful recovery?
Wuhan, the epicentre to the deadly outbreak is opening its borders once again after a symbolic visit from President Xi. This serves as a reminder to the markets that coronavirus is a temporary issue. Furthermore, China only had 43 new cases yesterday, like the UK. However, this is significantly down from the 3000 new daily cases at the height of the outbreak. So even as Italy goes into full lock down mode, there is light at the end of the tunnel and a V shaped recover can’t be completely written off.
An announcement from President Trump that he will ask Congress for economic relief for workers has also helped lift sentiment. A cut from the Fed combined with economic support from Washington is not the same as the Fed standing alone. US futures are on the rise, US treasury yields are rebounding from the record low and the battered US dollar staging a comeback.
The UK Budget tomorrow and Thursday’s ECB meeting will be in focus and could help the market decide whether the actions being taken are sufficient to stem the market fallout and recession fears
It certainly feels too early to call the bottom of this selloff. However, the market is giving signals that with the right response, a combined effort from central banks and governments this may not necessarily be the start of a bear market run.
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.