Fed and US Government Launch US Economy Assistance Programs - 18.3.2020

U.S. stock market sustained an upward correction

On Tuesday, US stocks quotations rose. The Fed launched the Commercial Paper Funding Facility, CPFF program and began to buy directly short-term corporate bonds in order to help companies affected by the coronavirus pandemic. The same measures were taken during the 2008 crisis and were quite effective. Let us remind that on Sunday the Fed lowered the rate to 0.25%. An additional positive factor for the stock market was the decision of the Administration of the US President Donald Trump to allocate $ 1.2 trillion as economic assistance to business and American citizens. The S&P 500 (+6%), Nasdaq (+6,23%) and Dow Jones Industrial Average (+5,2%) indexes rose. The S&P 500 is still 25% below its historic maximum, which was recorded on February 19, 2020. On Monday, it collapsed by 12%, which was the 3rd highest drop in its history. The first powerfull drop of the S&P 500 was in 1929, during the Great Depression, and the second in 1987, during the crisis. Yesterday, the following sectors of the S&P 500 turned out to be growth leaders: utilities (+ 13%), consumer commodities (+ 8.4%) and high technologies (+ 6.8%). We can also note good demand for the shares of individual pharmaceutical companies that announced the development of drugs from Covid-19: Pfizer Inc (+6,6%), Regeneron Pharmaceuticals Inc (+11,5%). Yesterday, the turnover of US exchanges amounted to 16.9 billion shares, which is 20% more than the 20-day average (14 billion). Today data on the residential real estate market for February will come out in the US. The ICE dollar index rose yesterday, and over the past 2 weeks has risen by almost 5%. There is a strong demand for US dollars in the world, as investors buy them when they get rid of the weak currencies of those countries that depend on exports: Canadian, Australian, New Zealand dollars, euros, the Russian ruble and others.

European stock indices fall today again after sluggish growth on Tuesday

European stocks rose yesterday along with American ones. Another positive factor was the statement by the Spanish government on the allocation of 200 billion euros to help the Spanish economy, which suffered from the coronavirus pandemic. Top gainers were the sectors of utilities and telecommunications. Top losers were paper airlines, tourism and entertainment sectors. Shares in the UK-based Cineworld Group cinema chain fell by 43% yesterday and the SSP Group restaurant chain 33% after news on quarantine in Britain. The British FTSE 100index crashed this morning by almost 5%. The shares of aircraft manufacturers fell significantly: Airbus (-12.8%), MTU Aero Engines (-15%) and Rolls Royce (-18%). Investment Bank JP Morgan predicts that recovery of air travel in Europe will take several years. According to it, in 2020 air traffic will be 20-30% lower than last year. Today, the EU trade balance for January and inflation for February in the 2nd reading will be released. EUR/USD quotes slightly decreased today. Investors expect that, following the example of Spain, other European countries will also announce economic stimulus measures.

Nikkei resumes decline after yesterday's growth

All Asian indices fell today, except for the Thai SET (+ 1.2%). Nikkei grew yesterday thanks to a statement from Bank of Japan. The Japanese Central Bank intends to spend 12 trillion yen ($ 113 billion) by the end of the year on the purchase of securities of Exchanged Traded Funds (ETFs) - owners of shares in Japanese companies in order to support the Japanese stock market and dilute the portfolio of shares already existing on its balance sheet. The head of Bank of Japan Haruhiko Kuroda said that at current stock prices, the hidden losses of his department could amount to 2-3 trillion yen. Today, Nikkei resumed falling and updated its minimum over 3 and a half years. Fujifilm Holdings Corp quotes soared by 15% thanks to reports from the Chinese authorities that its Avigan medication is helping treat coronavirus. Hang Seng fell 4.2% today and updated a 3-year low.

Brent Brent drops below its psychological level of $ 30 per barrel

Futures quotes for U.S. crude collapsed to a 17-year low. Goldman Sachs Investment Bank expects Brent quotes to drop down to $ 20 per barrel in the 2nd quarter of this year. According to its forecasts, global demand will fall in March this year by 8 million barrels per day (BPD), and for the whole of 2020 - by 1.1 million BPD. Rystad Energy Agency expects a decrease in global oil demand by 2.8 million bpd this year. Moreover, in April it predicts a drop in global demand by 11 million bpd compared to April 2019. The main reason for this may be the quarantine, introduced immediately in almost all countries. For example, Japan reduced oil imports by 9% in February. Australia has canceled all international departure flights for its citizens. Australian prime minister, Scott Morrison, said it could last six months.