By Eliman Dambell
After the manic moves in the markets last week, not many expected the volatility to possibly increase this week, however that is exactly what we saw. After a week of historical uncertainty, leading to a rapid rise in Gold, and sustained sell offs within stock and index markets, the expectation was that price consolidation would take place. The notion of “how long can you run at full speed before needing to stop for a break?” Placing your hands on both knees and pacing yourself for either a continuation of your journey forward, or retreating back home.
After a day of “pacing itself” the markets exploded on Super Tuesday as the FED opted into an emergency rate cut. Leaving traders in panic as what were initially assumed fears of the Coronavirus’ impact to the US economy became reality. This however was only one in a number of events this week which created volatility for market participants. Below we detail what the other headline events were, and the effect they had on the 3 most popularly traded financial instruments.
Monday began slowly as the markets held on to levels created from Friday. However after the US open and the release of the ISM numbers which came in close to the expected, we saw a rebound in global index prices. With the SP500, FTSE 100 and DAX all rebounding on the previous weeks lows. At this point, most of these markets had bounced from there support levels, which is a technical analysis tool, and many thought the next few days would see markets returning to bullish form.
Super Tuesday, the day where the democratic voters headed to the polls to help select the candidate to rival Donald Trump in the US 2020 elections. Although Joe Biden was the winner of this race. Tuesday was super for several other reasons. A surprise/emergency rate cut from the FOMC shocked markets as we saw fear take centre stage. The move which was meant to calm traders, by installing a safe pair of hands in the form of fiscal policy, did anything but. Traders recalled the last time an emergency rate this high was announced, and it was during the 2008 financial crisis. A call by the G7 nations did nothing to stem the bleeding, and created the backdrop for what was to follow further into the week.
The main headline on Wednesday was the Bank of Canada following their neighbors by cutting interest rates to 1.25%. With Australian GDP data coming in better than expected.
The days of the Central Banks, as both Mark Carney and Stephan Poloz of the BoE and BoC respectively discussed the state of the economies of England and Canada. This came as the spread of the Coronavirus in Europe continued, with the first death reported in the UK.
Today all eyes are on the number coming out of the US at 8:30AM Eastern. Non Farm Payrolls. Will the number be above or below the expected 175k jobs created in February.
Major Market Moves
- Crude Oil