After the U.S. stock market’s worst week since 2008 when there was a financial crisis, it sank into correction territory on Thursday due to fears of a recession resulting from the epidemic.
However, yesterday the stock market extended gains in the session’s final minutes, the Dow wrapped up its strongest one-day gain since 2009, while the S&P 500 and Nasdaq each had their strongest one-day rise since December 2018.
The S&P 500 and Nasdaq each jumped more than 4 per cent in a major rebound following last week’s steep sell-off sparked by fears about the coronavirus.
“We can shrug off an economic downturn, but if it starts to spill into companies’ capacity to pay their debts, then that creates deeper problems. But it seems to me like the central banks are linking arms to find a way to insulate the credit markets from economic uncertainty,” said Jack Ablin, chief investment officer at Cresset Wealth Advisors in Chicago.
Australia's Central Bank cuts interest rates
In response to the Coronavirus outbreak, the Australian central bank has cut interest rates and this caused the S&P/ASX200 to surge from the low levels of last week.
The outbreak is having a “significant effect” on the country’s travel and education sectors, the Reserve Bank of Australia’s governor, Philip Lowe said.
The governor also added that GDP growth in March would be weaker than expected. The Central Bank cut interest rates by a basis of 25 points, and Scott Morrison, Australia's prime minister, called on banks to pass on the full interest rate cut to customers to support households as they deal with the fall out from the spread.
Oil extends gains for a second day
Brent crude rose $1.26 per barrel (around 2.4%) to reach $53.16 per barrel this morning. The rise in value happened for a second consecutive day and expectations that central banks are likely to help the market to offset the impact of the Coronavirus outbreak. There was also the optimism that OPEC will order deeper cuts this week.
After suffering more than 20% drop from their initial 2020 peak (January), Brent and WTI rebounded and since Friday, WTI gained around 7.2% and Brent; 7%.
OPEC and its allies, meet on March 5 & 6 and are expected to announce output cuts.
Financial Events to watch for today
10.00 GMT - EUR Consumer Price Index - Core