(BFM Bourse) – Despite the new monetary support measures announced by the US Federal Reserve and the Japanese central bank over the weekend, the financial markets continue to falter in the face of a global crisis of unprecedented magnitude.
Events rushed over the weekend in the face of a health crisis that is taking on a global and unprecedented scale, leading to the cessation of activities deemed non-essential in most European countries and in an increasing part of American territory, including New York.
The time when the Chinese situation worried the world is far away now. As of March 15 (according to the latest status report on the WHO website), the number of new cases of coronavirus has reached 3,497 people in the past 24 hours, exceeding the number of new daily cases observed at peak in the province from Hubei where the epidemic started, observes Oddo BHF. And in the world, the number of new cases follows an exponential trend, and for once the adjective often overused is unfortunately current.
Ironically, activity seems to be gradually picking up in Asia, but Chinese authorities are concerned … about the number of new cases involving returnees from Europe or the United States.
The American president, after having minimized for a long time, finally has measures to restrict the population to the necessary displacements only by declaring a state of emergency. But the lack of responsiveness on the part of the American administration could give rise to an increase in the number of cases much faster than in Europe, fears Vincent Bloy, market analyst at IG France – all the more so as the proportion of patients tested across the Atlantic seems so far rather weak.
Fed rates cut 1%
The US Federal Reserve intervened again this weekend by lowering its rate by 100 basis points to 0% -0.25% and announcing a liquidity injection of $ 700 billion, ahead of its planned monetary policy meeting Tuesday and Wednesday. This gesture “could be catastrophic if the pandemic were to continue because it restricts the possibilities of the American Federal Reserve to reassure the markets. The lack of liquidity fears more and more an unprecedented financial crisis”, observes Vincent Bloy. “Indeed, the world has been inundated with liquidity for 10 years even though the economy was doing well, but given the magnitude of the crisis to come, the world central banks could find themselves with no room for maneuver to support the economy world “.
The Bank of Japan for its part maintained its rate at -0.10% but chose to double the amount spent on asset purchases, to 12,000 billion yen.
The extent of the damage in China, where retail sales fell by 20.5%, the unprecedented, and where industrial production fell to its lowest level since 1990, seems to give only a taste of the catastrophic fallout from containment measures in Europe and the United States.
In this context, the financial markets are constantly setting new floors, but what attention should we really pay to indicators that are totally confused anyway? World leaders “should rather focus on slowing the spread, then announce immediate and effective fiscal and budgetary measures before intervening at the monetary level,” said IG France analyst.
Because “if the epidemic continues and if the small traders are not massively supported, a monetary revival on a decimated economic fabric will have no impact and will probably lead to the worst financial crisis that the world has known”, fears he he.
European stock markets collapse
As for European indices on Monday, the CAC 40 collapsed by 8.62% to 3,763.16 points at 12:20 pm. This is its lowest level since 2013. The German Dax falters by 7.2%, the British FTSE 100 by 6.1% and the Milanese index by 8.5%.
If practically all of the Parisian values are in sharp fall, the most affected are in particular those of the specialized distribution like Fnac Darty (-26.6%) or Maisons du Monde (-20.1%). Airline is also rolled up with a drop of 16.9% in Airbus and 15.7% in Air France-KLM, which will reduce its offer from 70 to 90% for two months.
Within the CAC 40, Carrefour manages to remain close to breakeven (-0.2%), a performance in the context which is explained by the fact that food stores, and therefore large distribution, remain open .
Guillaume Bayre – © 2020 BFM Bourse
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