Financial markets spasmed, sending U.S. stocks down more than 5% and Bloomberg’s dollar index up to a record, as the economic fallout from the pandemic outpaced the massive response from Governments and Central Banks. The S&P 500 fell as much as 9.8%, before a late-session bounce trimmed the decline, with investors craving more government spending to offset the impact from the virus. After markets closed, the Senate cleared the second major Bill responding to the Coronavirus pandemic and White House Economic Adviser Larry Kudlow said the government might take an equity position as part of an aid package. Futures on the S&P 500 that trade till 4:15 p.m in New York trimmed declines. Sovereign debt tumbled around the world and municipal bonds extended the deepest rout since 1987 as markets braced for the potential flood of spending. Oil sank 24% to an 18-year low. The US Dollar strengthened a seventh straight day. The Pound hit its lowest level against the greenback since 1985. Dollar-funding markets remained strained, although improved from extreme levels in recent days. Stocks fell to session lows after Trump offered few details at a press briefing on the specifics his Treasury Secretary is discussing with Congress. The Federal Reserve dusted off crisis-era programs to stabilize financial markets. The planned U.S. stimulus could amount to $1.2 trillion, aiming to stave off the worst impact of a crisis that already looks set to plunge many of the world’s economies into recession. Meantime, the Federal Reserve reintroduced additional crisis-era tools to stabilize financial markets. Those responses came after stresses appeared in the short-term funding markets. Late last night, the European Central Bank launched an extra emergency bond-buying programme worth 750 billion euros ($820 billion) in the latest attempt to calm markets and protect a Euro-Area economy struggling to cope with the Coronavirus pandemic. The decision in an unscheduled meeting on Wednesday night is the latest in an escalating global response to an outbreak widely seen driving the economy into recession. ECB President Christine Lagarde reinforced the message that policy makers will do all they can, saying there are “no limits to our commitment to the Euro.” European bond markets surged from the open this morning, with Italian 10-year yields dropping over 100 basis points, and the gap between the debt of core nations and more stressed ones — a key indicator of stress — narrowed. Italy’s 10-year yield spread over Germany shrank by 80 basis points to 186 basis points, having soared over 300 basis points Wednesday. Greek bonds, which will be bought for the first time, saw yields drop 45 basis points. European stock index futures swung between gains and losses though, and the currency was down 0.2% at $1.0894 at 8:29 a.m in Frankfurt.
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The S&P closed 5.2% lower at 2398, well off its intra-day low at 2273.
The Dow Jones Industrial Average decreased 6.3% for a 1338 point fall to close at a three-year low at 19,898.
The German DAX fell 5%.
The Shanghai Composite dipped 1%.
Australia’s S&P/ASX 200 Index fell 3.4%.
South Korea’s Kospi index tumbled 8.4%.
Here is a summary of the main Changes in F.X. Markets:
The Bloomberg Spot Index gained 2.1%, hitting the highest level in more than three years.
The Japanese Yen was at 108.97 per dollar, down 0.8%.
The offshore Yuan fell 0.6% to 7.1154 per dollar.
The Pound fell 4.1% to $1.1546, reaching the weakest on record with its seventh straight decline.
The Aussie bought 56.63 U.S. cents, down 4.2%, which is the lowest level since 2001.
The Euro decreased 1.5% to $1.0856
The measures on Wednesday from the ECB include:
- Buying public and private-sector securities until at least the end of 2020
- Programme will cover all assets eligible under current quantitative-easing programme, and will be extended to commercial papers of sufficient credit quality
- Greek government debt will be included
- Collateral standards will be eased
- Programme will continue until ECB judges the crisis phase of the pandemic to be over, but not before the end of this year
- The ECB will consider raising its self-imposed limits on QE holdings, and will increase the size of its programmes if needed
The yield on 10-year Treasuries rose 14 basis points to 1.21%.
Germany’s 10-year Yield surged 16 basis points to -0.27%.
Britain’s UK Gilt surged 20 basis points to 0.76%.
Ireland’s 10 Year Yield gained 15 basis points to 0.50%, reaching its highest level in 10 months.
Australia’s 10-year yield surged 28 basis points to 1.49%.
West Texas Intermediate crude fell 24% to $20.50 a barrel.
Gold was down 2.2% at $1,494 an ounce.
This morning on the Economic Front we have Euro-Zone Construction Output at 10.00 am. This is followed at 12.30 pm by the U.S. Weekly Jobless Claims and the Philly Fed Manufacturing Survey.
March S&P 500
I have traded through the 1987 Crash and the 2008 GF Crisis but I have never witnessed a 24 hours trading like this. You could feel the pain of traders as the market looked like with 15 minutes to go when we were trading near the lows of the day that we were just going to crash before a late 900 point rally stopped the rout for now. The announcement after the New York close that the ECB were buying Euro 750bn of Bonds saw the S&P hit an overnight high at 2472 only to fall to a subsequent low at 2288 on more negative headlines on the Coronavirus. However, we have now rallied 100 Handles off this 5.00 am low and are now unchanged from last night’s close as I go to press. All my Indices hit my buy level yesterday. I was concentrating more on the Dow as the market finally hit my aggressive buy zone. After the S&P traded the whole of my buy range at 2300 I covered this position at my revised 2320 T/P level and I am still flat. One encouraging news for the Bulls was the fact that the VIX closed unchanged at a high 76.45, despite the US Indices closing over 5% lower. The S&P chart is showing a classic wedge pattern with positive divergence on both the MACD and RSI momentum indicators. We may see one more test of the lows but in my opinion most of this initial decline is over and we are due a strong bounce which may last into the end of the month. Today I will be a buyer from 2295/2345 with a 2269 stop which is just below yesterday’s low print. If I am taken long I will have a T/P level at 2380. I will be an aggressive buyer from 2100/2180 with a 2055 stop. If I am taken long here I will have a T/P level at 2290. The S&P has short-term resistance at 2490/2520 where I will be a small seller with a 2535 tight stop. If I am taken short I will have a T/P level at 2465.
I am still flat the Euro as market comes closer to my 1.0650/10725 aggressive buy zone. If I am taken long in this area I will have a T/P level at 1.0790 with the same 1.0595 stop.
June Dollar Index
The Dollar surged above 100 to close 2% higher at 101.20. The Dollar has now closed higher for seven straight sessions and this is the biggest gain for the Greenback since Black Wednesday in 1992 when George Soros ‘’broke the Bank of England’’, crashing the Pound and forcing Britain to withdraw from the European Exchange Rate Mechanism. The main reason for the Dollar surge is the world is short Dollars and this is reckoned to be in the order of $12 Trillion. In my opinion the only way we can inflate our way out of this crisis is to weaken the Dollar but this is proving to be extremely difficult. The Dollar has strong resistance from 102.00/102.60 where I will be a seller with a 103.10 stop.
After the DAX traded lower to my 8430 buy level I emailed my Platinum Members to exit any long position at 8485 and I am still flat. Despite the actions from the ECB last night the DAX is struggling to rally, even though we are trading 5200 points below last month’s high. Today I will be a buyer from 8220/8370 with a 8145 stop.
My FTSE plan worked well with the market trading lower to my 4980 buy level before rallying to trade above 5130 this morning. As I wanted to free margin for my long Dow position I covered this FTSE position at 5010 and I am still flat. Today I will be a buyer from 4930/5020 with a 4865 stop.
Dow Rolling Contract
Given the level of volatility I recommend that everyone who is not on my Platinum Service to upgrade as the updated emails are key. Yesterday I sent five emails and we made a lot of points as a result. Initially my Dow plan did not work well as after the market hit my 19575 average buy level I was stopped out of this trade at 19145. Subsequently the Dow traded lower to my aggressive 19080 buy level before rallying to my revised 19650 T/P level into the close. I sent another email to my Platinum Members to buy the Dow from 19100/19450. Overnight we traded the whole of this buy range for a 19275 average long position before the market traded higher to my 19950 T/P level and I am now flat. The Dow has now given up all the gains since President Trump was inaugurated in just four weeks. The Dow has now fallen over 10,000 points in that time. I will continue to be an aggressive buyer on any dip lower to 18600/19400 with a wider 18250 stop.
My NASDAQ plan worked well with the market trading lower to my 6840 buy level before rallying to my 6930 T/P level and I am now flat. Incredibly we traded to an overnight high above 7400. Today I will be a buyer on any dip lower to 6940/7020 with a 6870 stop.
Shortly after I posted the Bund traded the whole of my buy range for a 169.00 average long position before rallying to my 169.80 T/P level and I am now flat. The Bund sold off into the close but opened 150 points higher on the ECB decision and is now trading at 170.45. Today I will be a small buyer from 169.10/169.70 with a 168.65 stop.
Gold Rolling Contract
I am still flat Gold and I will continue to stay flat given the volatility.
Silver Rolling Contract
Since making a countertrend rally high at $19.00 on February 24, Silver has declined 36% in just 17 days, one of the largest percentage declines in this span time of 40 years. Yesterday’s decline saw the market hit my 11.90 buy level before rallying to my 12.30 T/P level and I am now flat. Yesterday’s low was 11.62 and this level needs to hold or else there is every chance we can test $10. Today I will be a buyer from 11.30/11.70 with a 10.95 stop.