Central Banks Print Money To Stop The Crisis
No day goes without another quantitative easing announcement. Yesterday, the European Central Bank has announced a 750 billion euro Pandemic Emergency Purchase Programme. The bank will buy securities of both private and public sector.
Meanwhile, the U.S. evaluates an aid package that may surpass $1 trillion in value. The actual content of this package is yet to be determined, but there’s little doubt that it will soon be implemented in some form.
In ordinary times, announcements of such massive quantitative easing programs would have pushed markets through the roof. However, nothing is ordinary right now due to the coronavirus crisis – S&P 500 futures are currently set to open almost 3% lower than the yesterday’s close.
The main problem is that purchases of financial instruments cannot defeat the virus, so the progress in virus containment is necessary for financial markets to feel better.
At this point, the numbers remain alarming: Italy has now more than 35,000 case, while the number of cases in United States has surpassed France and South Korea and will likely get ahead of Germany and Spain in the coming days.
Virus Gets To Wall Street
NYSE has announced that it will fully shift to electronic trading on Monday after it recorded two coronavirus cases. An employee and a trader got infected. NYSE promised that traders will not see any interruption.
While there is no doubt that all major exchanges are prepared to operate electronically, this news is a vivid reminder of the severity of the crisis. As the days go by, more and more venues get closed.
In this light, there is a big chance that forecasts of economic damage will continue to get worse as the crisis unfolds. That’s why the markets are falling despite the announcements of massive quantitative easing programs.
In addition, the markets may be worried that further increases in debt will later lead to additional financial turmoil in the world that is already awash in debt.
Winners And Losers
Currently, the primary beneficiary of the crisis is the U.S. dollar, as the U.S. Dollar Index rushed through the important 100 level, signaling the strength of the American currency against the broad basket of currencies.
On the equity side, Boeing has already lost almost 70% year-to-date as the company’s problems with MAX aircraft got combined with a coronavirus crisis which is devastating for Boeing’s clients – airlines. It will be interesting to see where the bleeding stops for both the planemaker and its clients, but currently there’s no bottom in sight.