Having lost confidence in the rebound by the end of Tuesday, the European markets had another go of it on Wednesday morning, boosted by the latest impromptu rate cut from a major central bank.
Caught in an awkward transition period between the tenures of Mark Carney, who steps down on March 15th, and the incoming Andrew Bailey, the Bank of England nevertheless felt it had to act, cutting interest rates by 0.5% to return them to a record low of 0.25%.
This gave an immediate boost to the European indices, though the level of growth began to peter out somewhat as the session really got started. The FTSE rose 0.6%, around half the rise posted after the bell, with the DAX up 0.9% and the CAC climbing 1.1%.
Investors will be hoping this is only Wednesday’s first act of stimulus. In an intimidating scheduling quirk, Rishi Sunak – who took over the chancellorship from Sajid Javid less than a month ago – is set to deliver the first annual budget of the Johnson government in the midst of the coronavirus crisis. Focus is going to be on what emergency measures the Chancellor announces to cushion the blow, with the markets arguably needing that secondary boost following the rate cut if the day’s gains are to be sustained.
The danger is that the Dow Jones, which eventually avoided the downturn seen by its European peers to climb just shy of 5% on Tuesday, is set to give back a lot of its growth when the bell rings on Wall Street. Currently the futures are pencilling in a 750 points decline, though that drop could be avoided if Donald Trump can get congress to pass the emergency relief plan proposed on earlier in the week.
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