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Hope for Fed move should still carry Wall Street

UNITED STATES (OBSERVATORY NEWS) — Wall Street should extend Tuesday’s rebound that started yesterday as European stock markets climb mid-session, hopes of a strong monetary response to the risk that the coronavirus epidemic poses to the supporting economy equity markets.

Futures signal an opening of the benchmarks of the New York Stock Exchange up about 1% after Monday’s spectacular progress with a jump of 5% for the Dow Jones, its best performance in percentage on a session since 2009.

In Paris, the CAC 40 took 1.72% at 5,425.07 points around 11.35 GMT. In Frankfurt, the Dax gains 2.05% and in London, the FTSE advances by 2.05%.

The pan-European FTSEurofirst 300 index rose by 2.37%, the EuroStoxx 50 in the eurozone by 1.84% and the Stoxx 600 by 2.34%.

The indices are still far from having erased their losses last week with a sharp correction on both sides of the Atlantic against the background of accelerating the spread of the virus outside China.

The rebound is driven in particular by the hope that the central banks will announce accommodative measures to deal with the economic repercussions of the epidemic.

The Australian central bank led the way by lowering its key rate on Tuesday for the fourth time in less than a year.

The most awaited reaction is that of the Federal Reserve, whose markets are now massively anticipating that it will announce on March 18 a rate cut of 50 basis points, before a further rate cut, of 25 points, at its meeting next in April, according to the CME Group’s FedWatch barometer.

On the government side, the G7 countries will express, in a press release to be published Tuesday, their determination to limit the economic impact of the epidemic but without going so far as to advocate a budgetary effort or coordinated reductions in the rate of interest, said two officials from this group of countries.

At mid-session in Europe, all sectoral indices are on the rise, especially those which suffered a lot last week such as transport and leisure (+ 2.63%) or basic resources (+ 3.25% ).

In Paris, the biggest increases in a CAC 40 fully in the green are for ArcelorMittal (AS: MT ), STMicroelectronics (PA: STM ) and Saint-Gobain (PA: SGOB ), which each take around 4%.

Even the Renault action (PA: RENA ), weakened however by the degradation of HSBC (LON: HSBA ) to “keep” and the sharp reduction in the target price, resumed timidly colors with a gain of 0.351%.

In Frankfurt, Qiagen, specialist in genetic examinations, jumped 18.74%, the largest increase of the Stoxx 600, after the announcement of its acquisition by the American manufacturer of laboratory equipment Thermo Fisher (NYSE: TMO ) Scientific for more than 10 billion euros.

On the bond market, government bond yields are rising to support the renewed risk appetite. That of 10-year Treasuries resumed almost six basis points to 1.146% after falling Monday to a new historic low, at 1.03%. Its German equivalent gained four basis points at -0.578%.

The dollar follows the movement to regain 0.13% against a basket of reference currencies including the euro, which gives up a little ground, around 1.112.

Crude oil prices are also on the rise, buoyed by hopes surrounding action by central banks and a more marked reduction in production in OPEC countries.

A barrel of Brent crude , which hit a low on Monday since July 2017 at 48.40 dollars, rose 2.83% to 53.37 dollars.

The barrel of light American crude for its part gained 3.38% to 48.33 dollars after hitting a 14-month low on Monday at 43.32 dollars.

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