[Pneumonia Bear Market] Multinational rescue of US stocks rebounded strongly Wall Street is still not optimistic because ...

Macro interpretation

Written by: Jingjing He

2020-03-14 06:26

U.S. stocks continued to fluctuate. After the Dow smashed more than 2300 points on Thursday, it opened a big rebound on Friday. The gap opened higher by 1246 points or 5.88%. Pu announced that the country has entered a state of emergency, allocated 50 billion US dollars to fight the epidemic, and purchased crude oil as a strategic reserve. The three major US stock indexes rose sharply, all closing up by more than 9%. The Dow rose 1985 points, the largest single-day increase since the tsunami.

Chinese, US, European, and Canadian governments join forces to "rescue the market"

One reason for the rebound in U.S. stocks is that many governments have resorted to "rescue the market." In addition to the United States' announced purchase of crude oil as a strategic reserve, the People's Bank of China also decided to implement the inclusive financial targeted reduction next Monday, releasing long-term funds of 550 billion yuan. The European Union has also spent 37 billion Euros to help the economy. The Bank of Canada also cut interest rates urgently, reducing the key overnight interest rate by 50 basis points to 0.75%, further indicating that the possibility of further interest rate cuts is not ruled out. The Bank of England's emergency policy meeting record this week also shows that the bank is likely to further cut interest rates and increase asset purchase efforts to help mitigate the impact of the new coronavirus epidemic on the economy.

The Bank of Canada announced an emergency rate cut and said it would not schedule another rate cut. (Reuters)

Wall Street is still not optimistic about the market outlook

Although the move by many countries, US stocks rebounded sharply on Friday, recovering most of the losses on Thursday. However, many Wall Street investments are still not optimistic about the market outlook. David Donabedian, the chief investment director of private wealth management company CIBC, frankly said that “the sharp daily fluctuations in U.S. stocks today show that investors do not know what to do next.” He predicts that unless the epidemic situation can Contained, and the market can be calmer and less volatile, otherwise it will be difficult for US stocks to continue to rise.

Dan Niles of hedge fund AlphaOne Capital also said that the epidemic situation is still serious, different from the September 11 incident and the explosion of the science and technology stock bubble, which mainly affects the demand side. The current epidemic is a "one-two punch" of supply and demand. It is possible to drag the United States into recession. Researcher Capital Economics reports that the measures to stop the spread of the coronavirus may force the US economy to contract by a staggering 4% in the second quarter, putting the economy into recession.

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