Naïve as it may be the markets sharply rebounded on Monday morning. Whether or not the gains can last the session, however, is another matter entirely...
There is plenty of reason why Europe should be in the red. The coronavirus death toll has crossed 3000, including the first 2 deaths in the US. New York State has reported its first case of the illness. Australia has announced its first 2 cases of local transmission. There have been sharp increases in the number of cases in South Korea and Iran. On Saturday China posted two horrendous PMIs, with the manufacturing figure at 35.7 and its services counterpart at 29.6, alongside a terrible Caixin manufacturing reading of 40.3 on Monday morning. The list could go on.
Yet, looking to justify buying at bargain prices, investors have clung onto the wave of stimulus statements that appeared over the weekend. Friday night saw Jerome Powell rescue the Dow as he claimed the Federal Reserve would ‘act as appropriate to support the economy’. Italy, currently the worst hit country in Europe, unveiled a €3.6 billion package to combat the economic impact of the outbreak. And this Monday the Bank of Japan said it would ‘strive to stabilise markets and offer sufficient liquidity via market operations and asset purchases’.
This has been reason enough for the markets to start March in the green – though they were likely looking for any excuse to do so after suffering their worst week since the financial crisis. The commodity-heavy FTSE led the way, climbing 2.8% despite airlines IAG (LON:ICAG) and easyJet (LON:EZJ) still being in the red. The DAX and CAC, meanwhile, were both up 1.7% respectively, with the Dow Jones tentatively pencilling in a 375 point bounce when the bell rings on Wall Street.
What may dictate how the rest of the day goes is the updated manufacturing PMIs – namely if they are significantly revised from the flash readings posted in February.
Beyond that, wave after wave of negative headlines regarding the coronavirus itself will test investors’ confidence in this rebound – a few more deaths in the US, for example, could seriously undermine the week’s green start.
"Disclaimer: Spreadex provides an execution only service and the comments above do not constitute (or should not be construed as constituting) investment advice or recommendations, or a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any person placing trades based on their interpretations of the above comments does so entirely at their own risk. Spreadex Ltd is a financial and sports spread betting and sports fixed odds betting firm, which specialises in the personal service and credit area. Founded in 1999, Spreadex is recognised as one of the longest established spread betting firms in the industry with a strong reputation for its high level of customer service and account management.
In relation to spread betting, Spreadex Ltd is authorised and regulated by the Financial Conduct Authority. Spread betting carries a high level of risk to your capital and can result in losses larger than your initial stake/deposit. It may not be suitable for everyone, so please ensure you fully understand the risks involved."