Portfolios do not panic20 Mar 2020 11:00
Hi guys apols for not getting back yesterday was hunting down toilet rolls. This a copy and paste from Investor chronicle which explains the Ms Largrde debacle and more .
.MARKET OUTLOOK
by Neil Wilson
The European Central Bank (ECB) loves inelegant acronyms. To LTROs and TLTROs we can now add PEPP - the Pandemic Emergency Purchase Programme. As cumbersome as it sounds, the €750 billion fund looks more like a bazooka than anything they've done thus far. Christine Lagarde and co knew they had to step it up and have. The asset purchase programme will loosen existing rules to cover non-financial commercial paper. The spread between Italian and German bond yields came back in to 188bps, after blowing out to 320bps. Italian yields have tumbled and across Europe sovereign bonds yields are lower. Ms Lagarde, I feel, realises it is indeed her job to prevent spreads widening and it seems she has finally got the message through to the market that the ECB is going to do 'whatever it takes'.
Elsewhere we see stimulus efforts stepped up. White House economic adviser Larry Kudlow has talked up the prospect of the federal government buying equities as the US senate passed its second coronavirus bill, at the same time as they rush to approve a third that will be worth $1.3tn. Relief is coming thick and fast: The Reserve Bank of Australia cut rates 25bps and starts QE; Japan eyes $276bn package of support; South Korea launches new package worth $40bn; and Brazil cuts rates 50bps to 3.75 per cent.
Yesterday, the Dow and S&P 500 finished 5-6 per cent lower, and trading was halted for 15 minutes at one stage as the 7 per cent circuit breaker was triggered. Asian shares followed lower overnight.
European equities are broadly higher after the ECB fired its bazooka, with the CAC in Paris leading the way with a 3 per cent rally half an hour into trading. Volatility remains however, and rallies are yet here to be sold. I prefer to look for stability over a few days than latch onto a single-day rally.
The FTSE 100 held the 5,000 level yesterday and the 4900 low was not even tested, which offers a flicker of hope. If you have a list of things you're looking for to decide whether the bottom is in, then that would be a tiny tick in the column. This morning the FTSE opened up a touch higher to reclaim the 5100 level. I'm not sure these stimulus efforts are enough yet to help the market fully bounce, but we are looking for signs of stabilisation with smaller daily moves in the main indices, and for certain sectors to start to respond better. Telcos in Europe rose 2 per cent in early trade, while Oil & Gas was up 1 per cent as crude prices ripped higher after yesterday's collapse.
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