Absolute sell-off on global markets
European equities plunge over 10%
ECB does not cut rates, special measures taken
Today was an absolute disaster for the global stock markets. Global equities took an enormous hit as coronavirus fears (now called a pandemic) spread worldwide. European stocks dived more than 10%! DE30 finished 12.24% lower while FTSE MIB dropped a staggering 16.92%! For many indices it was the worst day in the history marked by the biggest one-day drop ever. From the beginning U.S. stocks were set to open the session lower and they even seem to extend losses right now. Major U.S. indices are trading roughly 7% lower.
Today’s sell-off involves commodities as well. Crude prices are tumbling due to coronavirus fears and price war between Saudi Arabia and Russia. Gold and silver prices are falling as investors might be willing to sell those metals in order to raise cash and meet margin calls. Silver spot price is 5% down while gold is trading 3% lower. On the other hand, one can observe a safe-haven run on FX market as investors rushed to buy U.S. dollars. As a result most major currencies tend to fall today and the U.S. Dollar Index strengthens around 1%.
The main event of the day was the ECB rate decision. The European Central Bank decided to remain interest rates unchanged, even though analysts and investors were hoping for some cuts. The central bank chose to take some special measures instead for instance additional LTRO, which should guarantee immediate liquidity injection in the eurozone and TLTRO III with more favourable terms. Apart from that, the ECB announced a temporary QE extension of €120 bln monthly. During the press conference, ECB’s President Lagarde encouraged to implement some coordinated measures by fiscal authorities as she warned about the risk of further economic slowdown caused by coronavirus turmoil.
Tomorrow’s calendar with CPI reports from European countries looks rather poor. These days one should particularly pay attention to coronavirus updates and news related to the current global turmoil. After all, it is crucial whether governments will implement some additional measures in order to help the global economy to cope with coronavirus. It may turn out that certain fiscal measures may be inevitable.
Gold and silver prices are falling as investors might be willing to sell those metals in order to raise cash and meet margin calls. Gold prices fell sharply in the afternoon, yet they managed to rebound. The $1,550.00 seems to be a crucial support level for gold now.