Monday 24 February 2020

QE and rate cuts won't cure Corona

US equity indexes closed powerfully lower, sp -111pts (3.3%) at 3225. Nasdaq comp' -3.7%. Dow -3.5%. The Transports settled -3.7%.




US equities opened very significantly lower, pressured by a number of adverse Corona related headlines. Price action remained weak into the afternoon, seeing a spike floor from 3214, rebounding to 3253, but then leaning lower into the close. 

No mask for Ms. Yoon of CNBC, thats bullish, right?

Volatility naturally spiked, with the VIX settling +46.5% at 25.03. Whilst Tuesday could easily open lower, I'd be mindful of a Tuesday reversal, as high as around 3300, before resuming lower into end month.

QE and rate cuts won't cure Corona

It should be clear, the various central banks, not least the US Fed' will do the only thing they know.... cut rates and print.

Right now, rate cut'4 appears due at the FOMC of March 11th, or a more probable April 29th. Further, ongoing t-bill buying of $60bn a month will likely continue into the summer.

However many hundreds of billions the Fed and others central banks throw at the financial system, it sure won't cure the Corona virus. Whilst the human toll might remain statistically insignificant, a collapse of the global supply chain would merit as a black swan.

Ohh, and whilst the market is focused on Corona, there is the matter of who might become the Democrat nominee. It would seem Sanders will get the most votes, but whether the DNC can stop him... very difficult to say. March 3rd... aka Super Tuesday will merit extra popcorn.

Trump appeared after the market close...

Make of that... what you will.

Extra charts in AH (usually around 5pm EST) @

Goodnight from London
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