US stocks tank as Fed support fails to impress
US stocks suffered their worst day since 1987 despite supportive actions by the Federal Reserve. The Dow declined by almost 3,000 points while the Nasdaq dropped by 970 units. Investors are concerned that actions by the US government and states will push the country into a recession. Just yesterday, Trump urged the public against discretionary traveling and gathering. In San Francisco, residents were told to stay home except for essential activities while New Jersey recommended a curfew of between 8 pm and 5 am. The same trend is happening globally. Italy has been on lockdown while France said it would only allow people for essential trips. Canada closed its borders to most foreigners. As a result, most analysts believe that most countries will face a recession this year.
Gold erased most of its gains for the year yesterday as the market placed doubt on its role as a safe haven asset. The metal dropped to a low of $1,450 a troy, its lowest level since December. The decline also came just a day after the Fed slashed interest rates, which is usually viewed as being bullish for the metal. Analysts believe that hedge funds and other big investors were selling gold in large quantities to cover losses and margin calls. Other precious metals like platinum, palladium, and silver also dropped by more than 12%.
European futures rose by more than 2% as investors placed their hopes on government stimulus. According to the Financial Times, Eurozone finance ministers have asked the region’s bailout fund to consider ways of tackling the coronavirus illness. These officials are examining tools at the disposal of the €410 billion European Stability Mechanism. The ministers also endorsed a pledge by the European Commission and the European Investment Bank to mobilise up to €8 billion to lend to 100k firms. In the United States too, there are talks of bailing out the affected industries. Yesterday, a lobby group for airlines requested $50 billion in grants and low interest loans to fund their operations.
The EUR/USD pair was little changed during the Asian session. The pair is trading at 1.1182, which is above last week’s double bottom of 1.1053. The price is slightly above the 14-day and 28-day exponential moving averages while the signal line of the MACD is slightly above the neutral line. The pair may remain within the current range ahead of this week’s Fed meeting.
The XAU/USD pair declined to a low of 1450.90, which is the lowest level since January 2. The price is along the lower line of the Bollinger Bands while the average true range has soared. The volume has soared, which means that the pair may continue declining. If it does, it will likely test the important support of 1,400.
The GBP/USD pair was little changed during the Asian session. The pair is trading at 1.2262, which is slightly above yesterday’s low of 1.2200. The price is slightly below the 20-day and 14-day variable index dynamic average. The signal line of the MACD is rising. The pair may see some significant movements ahead of the release of UK jobs data.