Market News & Analysis


Top Story

Why Markets Are Still Falling Despite Fed's Action

The FTSE and European markets are following Asian markets overnight and tanking lower. Risk aversion is back with a bang, even after the Federal Reserve threw the kitchen sink at shielding the US economy from coronavirus.


On Sunday evening, the Federal Reserve made another emergency rate cut. This time slashing rates by 100 basis points bringing interest rates to 0-25%. The Federal Reserve also pledged to restart QE, purchasing $700 billion in treasuries. The Fed also cut reserve requirements for banks to 0%.

These moves will go some way to easing potential blockages in the system. However, the markets are still plunging this morning. This is because the market does not consider that the moves by the Fed and other central banks across the globe will sufficiently compensate for the economic hit that is coming from the coronavirus outbreak.

Central banks action not enough
More countries are closing their borders, more people ae in lock down or isolation or quarantine and businesses are grinding to a halt.  The supply shock demand shock will be unprecedented and airlines are already warning that they may not survive this crisis. Central banks across the globe have thrown what they can at the problem. However, the markets don’t consider it to be enough. Policymakers now need to step in to pick up and show that they are able to not only prop up the global economy but also stop the pandemic. G7 and G20 policy responses will now be in focus.

Fear in the driving seat
Fear is driving the markets. We have seen that policy moves so far have done little to stem this fear. The markets are unlikely to start showing signs of recovery until there is an improved prognosis surrounding coronavirus or until data out of China starts improving. This is likely to be a long way off yet given the dire Chinese data overnight. Chinese industrial production output fell to its lowest level on record in the first two months of this year after coronavirus brought the world’s second largest economy to a halt.

FTSE levels to watch
FTSE is trading 6.4% lower at 5020 after having rebounded off the low of 4841. The chart remains strongly bearish with the FTSE trading below 50, 100 and 200 sma.
Immediate support can be seen at 4841 (today’s low), 4795 (low July’10 and Aug’11). 4650 also offers support from resistance turned support in 2009.
On the upside resistance can be seen at 5220 (support turned resistance May’12) and today’s high at 5320, prior to 5650. 


Disclaimer

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

GAIN Capital Singapore Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the GAIN Capital group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), GAIN Capital Singapore Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact GAIN Capital Singapore Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither GAIN Capital Singapore Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

GAIN Capital Singapore Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.

Important Notice:

Cryptocurrencies are not legal tender currency and trading of derivatives on Cryptocurrencies are currently not covered under any regulatory regime in Singapore. Consequently, investors should be aware they do not have protection under the Securities and Futures Act (Cap. 289). Please ensure that you are fully aware of the risks.