Yesterday the Bank of England again stepped in to attempt to shield Britain’s economy from the coronavirus outbreak by cutting interest rates to 0.1% and also ramped up its bond-buying programme.
Late the day before the European Central Bank announced a stimulus package, also in the form of a bond buying spree.
The quantitative easing announcements helped to calm the bond markets yesterday and will directly add much needed money into these economies.
We see both of the above moves as positive news, designed to bring support and stabilisation to the financial system, along with the announcements this week from the chancellor of the support packages to be introduced for individuals and businesses across the UK.
In addition to these actions, the Federal Reserve provided support for money market funds. The Bank of Japan increased Japanese Government Bond purchases and offered further liquidity to the market. South Korea pledged more money for smaller companies. Australia cut rates and announced term funding scheme. So more government and central bank action is being pledged to counter the effects of the coronavirus.
Investors have taken the government support and policymakers actions as good news with a somewhat relief rally in markets this morning across Europe, with Asian markets also in the main having surged overnight. Adding to the mix were oil stocks boosting the indices after Trump hinted he may intervene in the price war between Saudi Arabia and Russia. Reuters indicates that there is little aggressive buying, but that the broad environment is perceived to be a bit better.
Away from financial news, amid the gloom of the forthcoming lockdown in movement, yesterday China provided a ray of hope, as it reported zero new local transmissions in a thumbs up for its draconian containment policies since January.
I have attached Lothar Mentel’s latest video from yesterday; as you will recall from my previous update, Lothar is a very experienced and successful investment manager providing investment strategies which we endorse.
Confusion reigns in Capital Markets
Since our last investment update video, governments and central banks around the world have acted precisely how we had suggested: They have put forward very sizeable monetary and fiscal support measures and stated repeatedly that they will and can ‘do whatever it takes’ and that there is ‘no limit’ in size as to what they may do.
In the attached video investment update I am discussing why, with the measures central banks and governments have now adopted under a quasi state‑of‑emergency wartime economic and financial regime, it is highly unlikely markets will be permitted to cause another global financial crisis. This remains a Corona health crisis that we all know will come to an end, what is unknown is the exact duration.
Please click on the link below to watch:
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