The Dow Jones booked another session of impressive performance on Monday, but Tuesday’s winners were the European indices, displaying something of an unsubstantiated market rebound.
Twittering Trump & Donald’s Dow Project
POTUS Donald Trump offered his two cents on the performance of US stocks today – opting to blame the sluggish start on Powell’s unaccommodating monetary policy.
When Jerome Powell started his testimony today, the Dow was up 125, & heading higher. As he spoke it drifted steadily downward, as usual, and is now at -15. Germany & other countries get paid to borrow money. We are more prime, but Fed Rate is too high, Dollar tough on exports.
— Donald J. Trump (@realDonaldTrump) February 11, 2020
Rather than do the wise thing and recognise wider market tensions, the president decided instead to throw a hissy fit and misinform the public. I mean, why advocate for wiggle-room when you can whinge about not being gifted a short-term rally in the run-up to election season?
Responding to the pressure to resort to negative interest rates, J. Powell commented,
“I’m not following the market as I sit here answering your questions… My colleagues and I are completely focused on using our tools to support the American people, to support the achievement of our goals and that’s really all we’re focused on.”
He added, on the Bank of England’s upcoming Climate Change Impact report:
Market winners and losers
The big news from the US today came from social media behemoth Facebook (NASDAQ:FB) dropping 2.28% or 4.85 USD to 208.61 USD a share. The biggest large cap loser, though, was Goodyear (NASDAQ:GT), down 13.04% or 1.72 USD to 11.47 USD a go, after the company fell short of its earnings estimates.
There was some rebound in oil, however, with Texas Crude up 1.50% to just over $20 per barrel. This came with talks today between Russian President Vladimir Putin and the leader of the country’s largest oil producer, Rosneft (MCX:ROSN), on the possibility of holding back 1.8 million barrels in oil production in an OPEC alliance to increase oil prices.
While oil price rises aren’t usually conducive to liquidity, it may be a welcome counterweight to the $20 per barrel price slash over the last month, brought on by Coronavirus.
The biggest winners today were without a doubt the European indices. After relying on the Dow Jones for injections of optimism over the last couple of weeks, the FTSE, DAX and CAC today found a new story to chase.
Despite the plethora of worries – from the Coronavirus, Brexit, US-China trade wobbles and the Bank of England’s upcoming climate change report – Eurozone equities were happy to clutch onto any slim glint of optimism. Today, this was provided courtesy of the world’s larger central banks, many of whom pledged to tackle the threat to markets posed by Coronavirus (which – in regular terms – will likely involve further, myopic deepening of negative rates).
Overview from a fellow optimist
Speaking on the movements during today’s session, Spreadex Financial Analyst Connor Campbell stated,
“Europe maintained its arbitrary optimism throughout the session, joined in its gains by the Dow Jones.”
“Like pretty much every day since the coronavirus became a major market concern, Tuesday has seen just as much debatable ‘good’ news for investors to hold onto as unquestionable bad news for them to try and ignore. After all, the morning’s headlines were full of fears that the illness could come to infect 60% of the global population, with the total death toll crossing 1000.”
“Nevertheless, investors’ appetite to keep buying – alongside the hopes that the world’s central banks are prepared to step in to dull the impact of the outbreak – produced another strong rebound for the European indices.”
“The DAX rocketed to an all-time high of 13650 as it added 170 points, while the CAC crossed 6050 after rising 0.6%.”
“Even the FTSE managed to rise 0.9%, leaping past 7500 once more. And this despite gains for sterling, which added 0.3% against dollar and euro alike following a broadly encouraging morning for GDP data (the 0.3% rise in December more so than the stagnation in Q4 as a whole).”
“The Dow Jones wasn’t quite enthused as its European peers. However, that’s in part because the index’s own gains on Monday helped inspired the growth seen by the FTSE, DAX et al. Instead the Dow added 120 points, lifting it back towards 29400, and putting another run at its own record peak on the table this week. That is, unless the negative coronavirus headlines don’t reach critical mass once again.”
“It will also be curious to see whether or not the results of this evening’s New Hampshire primary have any effect on the Dow. The Iowa caucus gained little market attention, at least partially because it was so unclear who the actual winner was. There likely won’t be any such confusion come tomorrow morning.”
Final note
Compounding the somewhat woeful state of affairs, the advice from UBS took the tone of ‘drink water when thirsty’; telling investors that Coronavirus would continue to pose a threat to global equities, and we should therefore look to gold for safety.