On Wednesday 28 October, stock markets around the world ended in a major collapse. What served as the trigger? Could it be that German Chancellor Angela Merkel suggested closing bars and restaurants in November to reverse the upward trend in infections? Or that France is planning to introduce a second national quarantine? Or maybe the data that the disease rate in the USA is at its highest level since August? Of course not!
The real reason for the fall is entirely the same as the markets have been growing since spring – the new money that the US Federal Reserve is printing uncontrollably. Everyone was waiting for a new $2 trillion package of measures to support the US economy. Republicans were supposed to be able to push the bill before the presidential election to help Donald Trump.
However, hopes collapsed after Mitch McConnell, the Republican majority leader in the Senate, announced that the Upper House of Congress would not resume work until November 9. And there may not be a package of measures aimed at supporting the economy anymore. After all, Donald Trump has repeatedly stated that he will not admit his loss in the presidential election.
What all experts have been saying for several months now is happening. There is simply no one to buy shares at these prices, without new, empty money coming to the markets. Investors have decided to pause and wait for news from the USA, who will be the next president. In the near future we can expect additional correction in the stock markets.
Oil prices also collapsed on Wednesday. One wonders why this did not happen earlier. Empty Central Bank money will in no way revive real demand, which is beginning to shrink again due to the second wave of coronavirus.
It seems that traders have already forgotten about the negative price of oil, which we saw just recently. This means that a strong downward movement, even to levels of $20-25 per 1 barrel, will trigger a new huge wave of margin calls.
What awaits us today?
04.00 Bank of Japan decision on interest rate
13.30 Annual US GDP data for Q3
13.45 ECB interest rate decision
14.30 ECB press conference on monetary policy
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