Coronavirus fears continue to drive volatility in markets with the uncertainty surrounding the impact on the global economy spooking market participants. The Fed’s emergency 50 basis point cut yesterday initially saw Wall Street rally but then tumble again on investor concerns over whether this measure was enough. The S&P was down 2.81%, the Nasdaq down 2.99% and the Dow down 2.94%. Asian equities however are currently marginally in positive territory.
EM currencies bounced sharply in the wake of the Fed’s rate cut with the Rand almost getting to the R15.20 mark. Price action was erratic and volatile and the Rand closed back at R15.40. We are currently trading at R15.37. The graph above clearly shows the knee jerk after the Fed announcement.
The Dollar fell post the rate cut as safe-haven currencies as the Yen and CHF gained. The Euro is quoted largely unchanged this morning at 1.1163 while the Pound is at 1.2817.
US Treasury yields have fallen further despite the 50 bps cut having already been priced in the market. Looking at the graph, the 10y yield hit a record low of 0.9060% last night and is currently quoted at 0.9747%. The 10Y bond yield has come down quite rapidly in the past 2 weeks, from 1.64% to sit below the 1.00% currently. The cut from the Fed yesterday was fully priced in by the market and the market is even starting to anticipate another 25bps cut at the April Fed meeting.
Gold gained on market fears, climbing from the lower $1 590.00 levels to be trading at $1 643.00 this morning. Platinum is higher and Palladium lower today.