It was a very choppy week on Wall Street[1] after its worst 5-day performance since 2008. The Dow Jones and S&P 500 gave up most of their upside progress from the middle of the week, leaving behind large upside wicks in acute signs of indecision. At one point on Friday, the VIX “fear gauge” touched highs it last saw since the Great Financial Crisis.
The haven-linked US Dollar[2] fell against the Euro[3] and anti-risk Japanese Yen[4] while shining against the pro-risk Australian and New Zealand Dollars. Emergency 50-bp rate cuts from the Federal Reserve and Bank of Canada failed to soothe financial markets for now. Sentiment-linked crude oil prices[5] closed at their lowest since August 2016 as anti-fiat gold prices[6] soared.
Coronavirus fears will arguably remain in focus as more cases spread outside of China in countries like South Korea, Italy, France and the United States. The limits of monetary policy in an era of low interest rates places the focus for support on fiscal stimulus. While the ECB can cut this coming week, they are already below zero and in the middle of a quantitative easing program.
Markets may tune in on the UK government budget announcement which will offer insight into measures to help support growth amid the Wuhan virus outbreak. Investors may also be awaiting more measures from the U.S. which has approved about $7.8b in emergency funding. Time will tell whether or not that will be interpreted as enough with the trade war impact on global growth still fresh in mind.
Fundamental Forecasts:
Gold Nears Record High as Yields Collapse & Volatility Rages[7]
Gold price action surged toward all-time highs after notching the biggest weekly gain in
