It’s been a roller coaster ride for global markets this week as investors, central banks and governments try to gauge the economic impact of the Covid-19 virus. After last week’s steep equity declines, many investors were looking to central banks to stabilize markets and shield economic growth from the virus, which is nearing pandemic status.
North American markets regained significant ground Monday as central banks, including the Fed and Bank of Japan, pledged to take action. By Monday’s close, a sense of optimism had returned as the Dow jumped nearly 1,300 points, the Nasdaq surged 385 and the TSX recovered 290 points.
However, hopes for a sustained recovery dwindled Tuesday as U.S. stocks fell sharply after an emergency interest-rate cut by the Fed failed to reassure markets. Although stocks initially moved higher after the 50-basis-point cut, U.S. markets soon turned volatile, with the Dow swinging nearly 1,400 points during the day’s trading. By Tuesday’s close, the Dow had lost 786 points, the Nasdaq fell 268 and the TSX declined 130 points. As investors fled riskier assets, they flocked to U.S. Treasurys, sending the yield on the 10-year note briefly below 1%.
N.A. markets reversed course once again on Wednesday over hopes for a coordinated global response to the virus and a strong Super Tuesday performance by former Vice President Joe Biden. Meanwhile in Canada, the BoC cut its key interest rate by 50 basis points Wednesday, lowering its target rate to 1.25%–the first cut of more than 25 basis points since 2009. By Wednesday’s close, all three U.S. markets were up significantly, with the Dow leading the way with a 4.5% gain of nearly 1,200 points and the TSX up more than 350. Despite equity gains, 10-year Treasury yields dropped to 0.994% by day’s end.
Markets again plunged Thursday as the outlook for corporate earnings and economic growth darkened as Washington state and California declared a state of emergency over Covid-19. All three U.S. markets notched declines of more than 3%, while the TSX shed 1.3%. Ten-year Treasurys again fell to new lows at 0.934%. With no immediate end to the virus in sight, analysts are expecting more volatility in the weeks, or perhaps months, to come.
source https://richarddri.ca/despite-rate-cuts-pandemic-fears-continue-to-rattle-markets/
Dri Financial Group 