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Global Markets Continue On a Meltdown Following Central Banks’ Emergency Rates Cuts

Global Markets Continue On a Meltdown Following Central Banks’ Emergency Rates Cuts
Justinas
Baltrusaitis
2 years ago
3 mins read

European equities closed the Monday trading session down by 8%. This drop was mostly induced by losses in Italy and France which are the two European countries most affected by the coronavirus pandemic.

This has brought the world to a halt, killed thousands, and has crippled several businesses. Europe has now taken over from China as the epicenter of the virus.

In yesterday’s trading bout, the Italian FTSE MIB (FTSEMIB), the French CAC 40 (PX1), and the German DAX (DAX) all recorded lows of about 8%, while UK’s FTSE (FTSE) 100 dropped about 7%.

Asian stocks were not left out in the beating with the Hang Seng Index (HSI) falling more than 4%, the Shanghai Composite Index (SHA: 000001) dropping roughly 3.5%, and the Japanese Nikkei 225 (NI225) shedding about 2.5%.


The widespread defeat came at the helm of the US Federal Reserve announcement to cut interest rate by a 1-percent-point. This decision was made in solidarity with recent interest rate cuts by the BoE and the BoJ in a bid to bolster the global economy.

The Fed’s Emergency Measures Still Isn’t Saving the Equities Market

This rate cut marks the second of such decisions in just a month by the Fed. By cutting interest rates to zero, many fear that the Fed has lost all its ammo against a scenario where the economy falls into recession. However, the Fed has reassured that it is keenly observing economic activities and is ready to adapt where necessary.

The Fed also announced that it intends to buy back $700 billion worth of government securities in the coming months.

Still, all these measures by the Fed could not save the US stock market from falling flat, with the Dow Jones Industrial Average (NYSE: DJI) dropping more than 1,000 points.

Dow Jones Industrial Average (NYSE: DJI) performance from 2016 to 2020. TradinView.com data.

The recent global financial meltdown has caused the US stock index to lose more than 32% from their record highs. This has given the market a very strong bearish bias after 11 years of record highs. Altogether, the Dow has shed about 9,500 points since its overall high in February following the prevailing global crisis.

On Friday last week, the Dow got a breather and rallied about 9.3% following President Trump’s declaration of a national emergency.

At the moment, there’s so much uncertainty in the stock markets and investors are fleeing to safe-haven assets like gold (XAU/USD), the Swiss franc (CHF), and the Japanese yen (JPY).

There’s no telling what the market will do next but we can expect further declines across indexes if the coronavirus pandemic scare continues to grow, unfortunately, this is looking like the most likely scenario.

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Justinas Baltrusaitis
Author

Justin crafts insightful data-driven stories on finance, banking, and digital assets. His reports were cited by many influential outlets globally like Forbes, Financial Times, CNBC, Bloomberg, Business Insider, Nasdaq.com, Investing.com, Reuters, among others.

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