03.03.2020 – Daily Report. Dead Cat Bounce or countermovement? The central banks will decide. And they will decide today at 1:00pm. After last week’s coronageddon, the stock market experts in Frankfurt, just like their colleagues in the USA, are now betting on intervention by the Fed and Co. The Dow is setting the strongest day ever. The DAX rises sharply.
Prices in Frankfurt rise
Wonderful times for traders: After the heavy sell-off, prices are now rising again seemingly unchecked. On Tuesday morning, the DAX recorded a plus of 2.8 percent to 12,190 positions. Hopes of concerted action by the central banks continued to dominate events. Woe betide if this hope is disappointed… This afternoon we know more – the most important date of the year is coming up.
Do or die from 1:00 pm
If you are trading CFDs or online shares, it will be really exciting today from 1pm. Then you need a broker with powerful servers and a Bafin license – because then the central banks of the leading seven industrialized countries (G7) will discuss the next steps in the Corona crisis. From 1 p.m. Central European Time, the finance ministers of the respective countries will also be connected in a telephone conference. According to CNBC, the meeting will be chaired by US Treasury Secretary Steven Mnukhin and Fed Chairman Jerome Powell.
After the latest intervention signals, inactivity would be the signal for a new sell-off. By the way, Saxo Bank also dampened medium-term hopes: a short-term bounce would not alleviate the pain for the corporate sector caused by Covid-19. We add: It’ll be a balm for the wounds of the stock-market bulls.
Always new requests to speak about stimulus
Already yesterday evening the European Central Bank spread hope: ECB head Christine Lagarde declared that the central bank was ready to take appropriate and targeted measures. Corona, she said, posed a threat to the economic outlook and the functioning of the financial markets.
French Finance Minister Bruno Le Maire followed up on Tuesday on Twitter, calling for a “strong and coordinated” response from the eurozone and the G7 countries in the fight against the consequences of the Corona virus.
And US President Donald Trump, before the G7 central banks’ conference call, once again called on his own monetary watchdogs to cut interest rates sharply. “Our Federal Reserve lets us pay higher interest rates than many others, even though we should actually pay less,” he twittered.
Australia lowers the prime rate
Meanwhile, the Australian central bank lowered its key interest rate to a record low on Tuesday. The Reserve Bank of Australia (RBA) cut the rate from 0.75 to 0.5 percent. RBA head Philip Lowe said the corona virus was a “significant” burden on the Australian economy.
Asian stock market participants wait and see
Despite all this, there was no real buying mood on the stock exchanges in Asia. The CSI-300 in China rose 0.5 percent to 4,091 points. The Nikkei in Tokyo lost 1.2 percent to 21,083 jobs.
Record day for the Dow
Wall Street had reacted very differently that evening: According to “ZeroHedge”, the Dow Jones experienced its strongest day ever and shot up 5.1 percent or almost 1,294 points to 26,703 points. The S&P 500 rose by 4.6 percent to 3,090 points. And the Nasdaq 100 gained 4.9 percent to 8,878 points. The news agency Bloomberg gave the starting signal for the mega rally with the announcement of today’s emergency call of the G7 countries mentioned above.
Another explanation for the bull market was provided yesterday by Morgan Stanley: hedge funds entered the market on Friday. Specifically, the investment bank’s prime brokerage reported: “the buying of US equities among Equity L/S funds on Friday was the biggest we’ve seen in the past decade. Where L/S stands for long/short. We would have liked to have known that earlier…
That’s what the day brings
Besides the G7 meeting at 1:00pm German time, the diary is rather empty. As always, you can find the overview here: Market Mover
The API oil report is due at 10:30pm
And on Super Tuesday, the Democrats will make an important preliminary decision on their presidential candidate.
The Bernstein Bank wishes successful trades!
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