(13 March 2020)DAILY MARKET BRIEF 1:$5 trillion Fed injection and still the worst day since 1987.
US stocks had their worst day since 1987 even after the Federal Reserve’s (Fed) announcement to flood the market with $5 trillion dollar over
the next month. The Dow closed 9.99% down, as the S&P500 and Nasdaq slumped 9.51% and 9.43% respectively.
If the additional Fed
liquidity couldn’t get investors excited, it is perhaps because the sell-off isn’t due to a thinning liquidity. In contrary, there is a
gradual rise in trading volumes across the leading market indices as the sell-off deepens. This means that buyers are around, the liquidity
is not drying up.
It seems like there is nothing the policymakers could do to stop bleeding. The combo of coordinated fiscal and
monetary interventions proved inefficient dealing with coronavirus-induced global sell-off. As we have mentioned in our earlier
reports, trying to boost activity through cheap and abundant liquidity at a time companies slow down operations to stop the coronavirus
contagion is swimming against a strong current. At this point, there is little alternative to letting the knife hit the ground.
Heavy
market headwinds in New York spoiled the mood in last day of trading in Asia, but not everywhere. The Nikkei lost 6.08%, Hang Seng fell 2.01%,
but the ASX 200 bounced 4.42% higher as oil gained.
By Vincent Mivelaz
