Financial market research and analysis

Our analysts have their fingers on the pulse of the world's financial market news.

CFD trading is high risk and may not be suitable for everyone.
Dow falls into bear market, FTSE to tank, little hope for ECB

Dow drops into bear market, S&P to follow after Trump speech

Trump managed to spook an already spooked market. European share markets are set for sharp opening losses. The FTSE is on course to tank 300 points to take it down 30% off its May 2018 peak. The Dow Jones entered a bear market, falling over 20% from a record peak and more big losses are expected today following a disappointing speech from the US President.

The US President outlined new measures the United States would take to fight the coronavirus in a speech Wednesday night, including a 30-day ban on travellers from Europe, excluding the United Kingdom. The travel ban is a decisive step to prevent the spread in the US but will cripple trade between the two continents. Goods will still flow but presumably at reduced pace and trade in services will almost grind to a halt.

The biggest source of disappointment on Wall Street was the lack of specific ways to support people and SMEs of the sort that were announced in the UK budget. Paid sick leave, free testing and a solution for uninsured Americans were all missing. The acrimony between the Republican White House and Democratic Congress since impeachment seems to be making it harder for the US to respond with the speed and vigour required. A scheduled 1-week recess by Congress starting Friday means further delays to new policy is likely.

Haven flows moderated slightly overnight following comments from the Governor of the Bank of Japan Kuroda. Kuroda said the Japanese central bank will aim to “stabilise the markets with asset purchases.” The Nikkei finished off its lows but the Australian ASX index was pummelled lower by 7% as commodity prices continue to slide.

UK Budget & BOE review

Assuming the coronavirus does take hold in the US and UK like it has in Italy. The stronger British government response might finally see UK shares outperform Wall Street counterparts in the eventual recovery. The biggest increase in spending for 30 years will mostly funded by a large increase in borrowing. In other circumstances, the higher borrowing might have risked the UKs credit rating. With interest rates so low, an emergency to tackle short term and low productivity to tackle long term, the response to the budget from markets has been constructive.

The British pound fell after the surprise 50 basis point cut to UK interest rates but quickly rebounded to turn higher on the day. The turnaround came as Rishi Sunak announced a £30 billion stimulus package to combat the economic damage from the coronavirus outbreak in conjunction with a big-spending long-term budget.

There is an element of traders rewarding the more proactive central banks. In terms GBPUSD, it’s probably more a matter of buying pounds to sell dollars before the Fed cuts rates again at its March 18 meeting.

ECB Preview

There are two things markets care about right now; the coronavirus and policy accommodation.

Taking a look at how markets are positioned right now, we don’t see any big expectations for the ECB. European stock markets are tanking and the euro has taken off. That could mean the ECB can hop over a low bar but it is hard to see how with such little room for manoeuvre.

Staff forecasts will be out of date since they needed to be submitted two weeks ago before the big coronavirus outbreak in Italy. The focus will all be about the decisions taken. From a trading perspective the 12.45 policy announcement could for once create bigger waves than the 1.30 press conference.

To have any real impact on the economy, the only thing the ECB can do is inject liquidity and offer backup to bank loans targeted to people and businesses most in need, probably via targeted TLTROs. If the ECB is looking to prevent a negative feedback loop from the turmoil in financial markets hitting the economy, with rates at the zero bound, the only solution is more QE.

Opening calls
FTSE set to open 306 points lower at 5570
DAX set to open 575 points lower at 9863
S&P 500 to open 106 points lower at 2635


Gold hits 7-year high after Powell Warning
Fed Chair Jay Powell has warned the US economic recovery might last through the end of 2021. The Fed is normally too optimistic in its forecasts so the outlook feels bleak. Still, warm weather is encouraging countries to continue exiting lockdown. If the flu s… Read more


Powell predicts more pain to come but no NIRP
A warning from the top of the US central bank that there’s more pain to come isn’t going down well across markets. Fed Chair Jerome Powell warned yesterday that more stimulus will likely be needed in the US to fend off the economic damage done by virus and pol… Read more


“Suffering and death” warning hurts markets
A sense of caution has taken hold across markets. Shares, riskier currencies and oil are pointed lower. There’s a reassessment of the likely timeline for economic reopening. Our sense is markets juiced up by higher liquidity may have gotten ahead of themselves… Read more


Bitcoin halving, dollar breakout on second wave fears
Market sentiment remains fragile. There’s a lot of emphasis being placed on the virus numbers in economies that have been gradually reopening.  Wuhan, the City in China where it all began reported its first ‘cluster’ of new cases yesterday after lifting restri… Read more


US oil lowest since 1999, European shares diverge from Wall St
Another oil crash US crude prices have plummeted over 15% to the lowest since 1999. The 21-year low came as sellers were trying to get ahead of the expiry of the May contract tomorrow. Open interest was five times the average. A condition of Super Contango in… Read more


Lifting restrictions, Softbank & Gold 7-year high
Stocks rising Markets are restarting after a long Easter weekend with a positive tone. Things have moved on from when there was so much bad virus news that the weekend was to be avoided at all cost. European shares look set for a positive open as more nations… Read more


S&P 500 enters bull market, lockdowns to extend
The mood in markets continues to improve but it’s patchy. Virus cases continue to rise at a rapid clip but markets are extrapolating the data forward and hoping we’re close to a peak.    Asian and European markets are playing catch-up to the rally on Wall St… Read more


Rally fizzles out, Tesco pandemic costs, Sterling & Boris
Optimism is fizzling out as doubts grow about how and when exactly quarantine and lockdown restrictions will end. The failure of Eurozone finance ministers to agree joint action underscores the limited capacity of governments to cushion the coming economic fal… Read more