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Morning Market Wrap: Fed efforts have a muted impact on US markets

24 Mar 2020
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The significant jump in US cases appeared to take centre stage and counteract positive announcements by the Fed, which resulted in a very choppy session for US markets…

Wall Street recorded heavy losses as the rapidly rising number of coronavirus cases overshadowed the Federal Reserve’s pledge to buy unlimited bonds and bolster emergency lending facilities to support the flow of credit.

The Dow Jones was the worst-performing index with a 3.04% decline, while the NASDAQ only dipped 0.27% after spending a fair portion of the extremely choppy session in positive territory. The Dow Jones’s 3.04% dip drove it to close at 18,591, its lowest reading since November 6, 2016, the day of President Trump’s election. Once again, US futures hit their 5% daily limited at the open of trade while the New York Stock Exchange went all-electronic on Monday, marking the first time the exchange has operated without floor traders.

The Federal Reserve’s announcement to buy an unlimited amount of treasury bonds and mortgage-backed securities is their most aggressive action so far to provide the greater economy support. However, it appears a very bearish oversight remains as New York Governor, Andrew Cuomo, announced the number of confirmed cases in New York state jumped to more than 20,000, making it a hot spot in the global pandemic. Another influence that seems to be weighing on the market is the haphazard efforts by the government to act as one and provide a clear action plan. Over the weekend, previously stated stimulus measures failed their first test vote and missing the 60 votes needed with a 47 to 47 split. Senate Democrats voted against the Republican developed package arguing the details of the bill were geared towards helping Wall Street and not Main Street.

 

The ASX200 declined 270 points (5.62%) and closed at 4,546, its lowest level since December 2012, as Financials sold off heavily.

Financials were the worst-hit declining 10.22% to 2012 levels.  The big-four banks led the charge with Australia and New Zealand Banking Group (ANZ) giving up 11.99%, National Australia Banking Limited (NAB) shedding 11.37%, Westpac Banking Corp (WBC) dropping 10.22% and Commonwealth Bank of Australia (CBA) declining 9.43%. NAB briefly touched on 1996 lows during the session, and similarly, a fifth contender, Macquarie Group Limited (MQG) dropped 15.3% to a 2016 price of $72.02. Following close behind Financials was Consumer Discretionary, which shed 8.33%, and Information Technology and Energy, which declined 7.24 and 7.51 per cent respectively as markets continued to selloff in the face of a significant pickup in local and global quarantine efforts.

Healthcare managed to avoid the selloff as a 4.19% recovery achieved in the final hours of trading by CSL Limited (CSL) drove the sector 2.61% higher. CSL had been down over 10% earlier in the session; however, late buying helped to limited the falls seen across the broader market and partially offset the extreme losses incurred by the big-four banks.

*Note: These prices are based on futures and/or CFD pricing and may therefore differ slightly from spot pricing.

Commodities and Currencies

Iron ore experienced another demand shock and dipped 7.9% to $US81.07 a tonne. The selling pressure seen across Brent Crude a day earlier eased however not enough to ensure a positive movement with global prices dipping 2% to $US26.44 a barrel. Gold surged 5.36% to $1,563.53 an ounce as investors sought to hedge themselves against equity markets.

This article was written by Thomas Brunton – Senior Equity Analyst, Rivkin Securities Pty Ltd. Enquiries can be made via [email protected] or by phoning +612 8302 3633.

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