Morning Minutes 3/13/2020

Morning Minutes

Stocks Rebound on More Rate Cuts and Short Selling Bans

March 13, 2020
8:45 am EDT

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Market Commentary By:
Colin Cieszynski, CFA, CMT
Chief Market Strategist
ccieszynski@siawm.com
+1 (647) 282-4428

It has been another wild night for world markets. Coming off the 5th worst one-day percentage decline for the Dow Jones Industrial Average of all time at 9.99%, and the worst since the Crash of 1987, stocks are on the rebound today. Coming off a Thursday that started with markets going limit-down and triggering circuit breakers, US index futures hit limit-up with 5.0% gains.

European markets are up sharply today. Milan is leading the charge with a 14.2% gain, while the Dax, FTSE and CAC are all up 6.5%-7.5%. Asia Pacific markets were mixed varying between a 4.4% gain for Sydney (the market with the most similar composition to Canada), to a 6.0% loss for Tokyo. Hong Kong and Shanghai lows about 1.1%, while Seoul fell 3.4%.

Commodities are also on the rebound again today. WTI crude oil continues to trade above $30.00/bbl up 5.65% today near $33.25. Brent Crude is up 6.1%, while copper is up 1.7%. the Loonie is starting to rebound with a 0.5% gain so far this morning.

Capital continues to move back out of defensive havens. The Japanese Yen is down 2.4%, Gold is steady but remains below $1,600/oz and bond prices are slipping.

In my opinion, a number of factors appear to have combined to temporarily ease the panic and help markets rebound today including:

  • Yesterday’s plunge may have finally washed out some of the immediate panic selling. We could be seeing short covering and bargain hunting today.
  • Although markets were underwhelmed at first, the Fed and the ECB did announce new emergency stimulus yesterday. Monetary support continued overnight with Norway announcing a surprise 0.50% interest rate cut and China freeing up more capital for its banks through a 0.50% cut to bank reserve requirements.
  • South Korea, Italy and Spain announced temporary bans on short selling.
  • Rumors have been circulating that the White House and Congress (both parties) are nearing a fiscal support deal that could include a number of measures designed to help individuals.

Yesterday saw several violent swings in both directions including a 1,000+ point round trip within an hour. The overnight rebound looks encouraging so far but we have seen dead cat bounces quickly end in tears lately too. With the weekend approaching, volatility may remain high with the potential for more intraday moves in both directions.

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