Foreign exchange sky eye app news: Seeing that March is more than halfway through, the global financial market is "frozen three feet cold". The Fed's emergency operation of not playing cards according to common sense echoes Trump's constant shouts and urgently issues a "king bomb" rescue - a historical emergency interest rate cut + quantitative easing.
However, the pessimistic reality has once again given Trump a heavy blow, and the market is not happy to stage a bull stampede! Global investors "voted with their feet" and did not believe that the "printing machine-style" rescue measures could effectively deal with the impact of the new crown epidemic, the US stock index "three meltdowns in January", silver "avalanche" plunged, and the financial market fell into a "wailing".
Surprises turned to horror, and "Black Monday" reappeared
At 9:30 last night, the US S&P 500 index opened down 220.60 points, down 8.14%, to 2490.47 points, the NASDAQ index opened down 482.20 points, down 6.12%, to 7392.73 points, the Dow Jones index opened down 2250.50 points, down 9.71%, at 20935.16 points, the US stock index "cliff-like" low opening made the S&P 500 index directly trigger the third circuit breaker this month. After the US stock market meltdown, Trump tweeted: God bless the United States!
As of the close, the Dow Jones closed down 12.93 percent at 20188.52, the lowest since February 2017; the Nasdaq closed down 12.32 percent at 6,904.59 points; and the S&P 500 closed down 11.98 percent at 2,386.13 points. U.S. stocks hit the biggest drop in 33 years, with technology, oil, precious metals and Chinese stocks leading the decline, and other equity assets were also sold off, and the market reappeared on "Black Monday".
In the field of commodities, on the 16th, the domestic and foreign commodity markets were largely green, especially Brent crude oil fell by more than 10% at one point, breaking 30 US dollars / barrel intraday, for the first time since February 11, 2016.
International gold futures prices also hit their lowest level since December, and have now fallen nearly $200/oz from their recent high of $1703/oz. Silver futures plunged 12% and broke the $12/oz mark during the session, the lowest level in 10 years, and the overall trend was weak.
Why did the Fed's "king bombing" backfire?
For the Fed to cut interest rates to near zero and launch a large-scale QE plan of 700 billion US dollars, Ren Zeping, chief economist of Evergrande Group and president of Evergrande Research Institute, called it "drinking and quenching thirst".
Industry insiders generally believe that at present, in addition to cutting interest rates to zero interest rates and restarting qe, the Fed has almost done everything else that can be done in the short term, such as: the reserve requirement ratio has dropped to zero, reduced the discount window borrowing rate and extended the borrowing period, and joined forces with Canada, britain, Japan, Switzerland, and the European Central Bank to inject dollar liquidity into the market through dollar swaps, and the current conventional monetary policy is close to the limit.
Xu Ying, a precious metals analyst at the Orient Securities Derivatives Research Institute, said that the Fed's rescue of the market can only be said to have done its best for the current stock market decline, but the effect is not satisfactory. "The Fed can only provide a loose monetary policy environment with low interest rates, but a large part of the current market decline is due to the pessimistic economic outlook under the epidemic, and monetary policy cannot directly combat the virus, the panic in the market has not shown signs of decline from the current point of view, and the volatility of the future market has increased."
Xu Ying said that due to the serious impact of the global spread of the epidemic on the economy in the short term, the tightening of financial conditions, the sharp decline in oil prices led to a significant decline in inflation expectations, and the willingness of residents and enterprises to borrow with pessimistic expectations of the economic outlook declined, only the stabilization of the demand side can really solve the problem. She further stressed that the liquidity shortage problem has not been effectively alleviated in the short term, deflation is expected to be strong, gold will build a bottom oscillation, and high volatility is the norm.
Wang Yanqing, an analyst at CITIC Construction Investment Futures, told reporters that the Fed does not have the ability to save the new crown epidemic crisis, after all, infectious disease control does not belong to the monetary and financial field. In the stage of the spread of the epidemic, the Fed's "opening the floodgates and releasing water" will not allow people to go out to consume, and it is difficult to stimulate enterprises to expand production and investment. But from the perspective of asset prices, in the context of global monetary easing, precious metals after the correction have a lot of room for imagination.
Guosen Futures analyst Gu Fengda said that the recent financial market sentiment in the recession panic and policy stimulus rescue expectations quickly swayed, all kinds of risk assets suffered a comprehensive and indiscriminate sell-off, the current whether it is a cyclical product with strong fundamental resilience, or a precious metal with strong hedging attributes have a significant weakening of its resistance. "In the face of the new crown epidemic, liquidity traps and crude oil share battle, the market has also been in a huge fluctuation, risk aversion is also in a state of instability, the past 6 trading days, crude oil per day amplitude of more than 10%, highlighting the market in the panic and the impact of events under the huge volatility, and due to the recent global equity assets fell too sharply, many other positions including precious metals were sold by institutions in exchange for cash flow, resulting in an indiscriminate decline in various types of assets." he said.
How the future market is interpreted
Since March this year, the US stock market has seen three circuit breakers, and this unprecedented situation reflects the extreme fragility and huge volatility of the current US stock market. At 21:34 on March 9, 2020, investors witnessed the second circuit breaker in the history of the US stock market, and then at 21:35 on March 12, 2020, investors witnessed the third circuit breaker in the history of the US stock market, and at 21:30 on March 16, 2020, investors witnessed the fourth circuit breaker in the history of the US stock market.
At the same time, as Fed interest rates fall to near-zero levels, forcing central banks to follow interest rate cuts or expand asset purchases, this further stalemates can become increasingly turbulent in the global "interest rate cut tide". According to incomplete statistics, on the 16th alone, at least 11 countries and regions including South Korea, New Zealand, the Czech Republic, Saudi Arabia, Qatar, Jordan, the United Arab Emirates, Bahrain, Sri Lanka, Chile, Hong Kong, and Macao announced interest rate cuts or expanded asset purchase plans, in addition to the heads of central banks of many countries that will introduce interest rate cuts and other monetary easing policy measures in the near future.
Central bank guards assemble
"The current performance of global financial markets is very similar to that of 2008, with panic declines in US stocks, crude oil and gold." Everbright Futures analyst Zhan Dapeng told reporters that the Fed had launched QE for the first time on November 25, 2008, according to historical experience, QE after the launch of the U.S. stock market in the short term, but also only maintained for one and a half months and then turned down again, crude oil has fallen until February of the following year, the most beneficial is actually gold, stabilization earlier than the U.S. stocks and crude oil, and if the market risk pricing consideration is to point to the direction of the financial crisis, then gold's rapid correction is a long opportunity Gold is not pessimistic in the long run.
Zhan Dapeng said that the current short-term decline in gold can be explained in two ways, one is because of the chaos in the global financial market and the expectation of inflation deflation caused by the economic downturn expectations, gold follows the downward trend of US stocks and crude oil, which also occurred in 2008; secondly, due to the active scale of the US gold leasing market, when the market liquidity is extremely tight, before the Fed releases liquidity, gold leasing is a good method. But he said that whether it is the first explanation or the second explanation, as the Fed injects a lot of liquidity into the market, it will help gold stop falling and stabilize, so gold is still a bargain buying pattern in the medium and long term.
Georgieva, the newly elected managing director of the International Monetary Fund (IMF), said that in order to prevent the long-term damage caused by the epidemic to the economy, additional fiscal stimulus measures are needed, calling for global monetary, fiscal and regulatory support. She said she was ready to mobilize $1 trillion in loan capacity to fight the pandemic. The Leaders of the Group of Seven (G7) also said they would hold a video conference to discuss a coordinated response to the COVID-19 pandemic.