Double-punch of Covid-19 and oil shock rekindle memories of 2008 financial crisis and Black Monday
The long-anticipated – and feared – moment when Covid-19 would infect the markets arrived with a bang.
Despite efforts by central banks and a less-than soothing address from President Trump, markets the world over went into free-fall as the coronavirus extended into more than 80 countries, sending infections and deaths surging.
With comparisons to Black Monday of 1987 and the great crash of 2008 circled on policymakers’ jotters, the New York Fed said it would inject a record $1 trillion into American money markets by purchasing Treasury securities across a range of maturities.
That is quantitative easing on a scale and with a speed never seen before, wrote David Goldman. The Fed is trying to stop a financial avalanche that threatens to bury risk assets and throw the world into a deep recession.
It was enough for US stock prices, which had fallen by almost 10% at their lowest, to recover a good deal of their lost ground by the end of the week.
For a gauge of the impact on the broader economy, look no further that US Treasuries.
Prices of the benchmark debt climbed to their highest levels since 2009, as investors continued to flee risk assets, writes by David Goldman. The market, though, highlights how the dollar can no longer be considered the haven asset it has been for decades.
Contained? On Friday, the Chinese mega city of Wuhan, ravaged by the pandemic, reported just five fresh Covid-19 cases.
In China, where Covid-19 first emerged late last year, local cadres began the arduous task of trying to resuscitate the faltering economy as the number of new infections slid.
The central Chinese mega city of Wuhan, ravaged by the pandemic, reported just five fresh cases on Friday, writes Frank Chen. Cadres say these figures give further credence to the official claim of an emerging diminution, that the pneumonic plague could have already been vanquished.
More was at play than coronavirus in the markets’ unravelling, however.
On Monday, the global oil price cratered. The impetus was the collapse in talks between Russia and the Organization of the Petroleum Exporting Countries (OPEC) on further cuts to production. But, writes Christian le Miere, the systemic causes of the oil-price collapse are beyond government control.
Ordinarily, an oil slump should be good news for net importer Asia. Not this time.
This “is a cross-asset story at this point with no obvious winners” Homin Lee, regional economist at Lombard Odier, told Umesh Desai.
Read the full stories on Asia Times
Fed throws $1 trillion into money markets as financial volcano erupts
As virus’s grip weakens, focus shifts to economy
When did the dollar cease to be a safe haven?
Oil price collapse beyond any government’s control
Oilmaggeddon is still bad news for Asia
Stocks, oil fall as Trump’s Europe ban fans fear
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