March has been a month of madness, the situation with the Coronavirus has continued to develop, leading to the virus spreading to countries the world over. This rapid spread has led to more than 500 million people being told to “stay at home”, as the pandemic has led to shutdowns of several countries. These shutdowns as a result have affected several sections of society. From everyday consumers to businesses of all sizes.
As a result financial markets have shown extreme levels of volatility, with markets moving at record speeds. This Thursday looks set to be no different as the market awaits several key economic announcements to come from various regions. We explore some of what is to come Today in various markets below.
Days after the UK Prime Minister Boris Johnson decided to lock down the country due to the Coronavirus, the Bank of England is set for big decisions on what many are calling Super Thursday. The Central Bank now led by Andrew Bailey, after Canadian Mark Carney’s 7 year helm at the Bank ended this Month, has big decisions to make on the Bank’s role during the current economic climate.
Fiscally the UK have responded strongly during this Pandemic, with all “non-essential” shops and businesses told to close, many have lost jobs. However Rishi Sunak, Chancellor of the Exchequer has committed over £330bn in funds, to help ease the burden of those suffering. 16 days ago also saw the Bank of England cut rates for the 2nd time in a month going initially from 0.75% to 0.25%. Thereafter making another cut this time slashing the base rate from 0.25% to 0.1%
With all of these moves taking place in relation to Macro and fundamental events, the markets have responded.
As the above chart shows, the FTSE 100 has suffered significant losses in this period. Losses which have effectively wiped out all of the gains from the last 10 years, in just 3 months of trading. However the position the UK Government has taken so far, as well as that of the Bank of England, has led to somewhat of a rally within this index. Since the second rate cut, prices started to hold firm onto a level of support, and bounced from the floor level of 5011. Now trading at 5610, could the Bank announce more measures that led to a breakout of this resistance point?
Similar to the UK, the US has also experienced significant losses in it’s economy during this period. Like the BOE, the Federal Reserve has also cut rates twice within this period, with the US Senate also passing an economic stimulus bill which totals $2 trillion.
Since the passing of this bill several US markets have rallied, the Dow Jones experiencing gains of 15% in 2 days of trading. Thursday will be an important one in the US as initial jobless claims, GDP numbers and advanced goods trade balance numbers all set to be announced. All of this creates the potential for further movement in markets as we head to the end of March.