Markets rally as Fed unveils 'game changer' support measures

Published: March 24, 2020
US central bank pledges to print cash in a move not seen since global financial crisis. PHOTO: REUTERS

US central bank pledges to print cash in a move not seen since global financial crisis. PHOTO: REUTERS

HONG KONG: Equity markets and crude prices surged while the dollar sank Tuesday after the Federal Reserve unveiled an unprecedented bond-buying programme to support the US economy.

While much of the planet goes into lockdown, traders gave massive thumbs up to the US central bank’s pledge to essentially print cash in a move not seen since the global financial crisis more than a decade ago.

The Fed, which has already slashed interest rates to record lows, said it will buy unlimited amounts of Treasury debt and take steps to lend directly to small and medium sized firms hammered by restrictions across the country.

The plan failed to inspire US traders, with all three main indexes on Wall Street sliding, but equities in Asia rallied with Tokyo ending more than 7% higher.

The Nikkei was given extra lift by a Bank of Japan decision to embark on its own massive bond-buying scheme.

Seoul was up more than 8%, Hong Kong, Sydney, Singapore and Taipei all rose more than 4% and Wellington lifted more than 7%.

Shanghai and Mumbai added more than 2%, Bangkok more than 1% and Manila 0.7%, though Jakarta fell almost 1%.

In early trade, London jumped 4%, Paris soared 6% and Frankfurt climbed 4.5%.

AxiCorp’s Stephen Innes called the Fed’s move “the most significant monetary experiment in the history of financial markets”.

“Asian investors like what they see from an all-in Fed, which is being viewed in a very impressive light for both Main and Wall Street, even as the US congress dithers,” he added.

Edward Moya at OANDA said it was “a game changer”.

But Innes pointed out that US senators remain gridlocked, with Democrats on Monday again blocking a nearly $2 trillion rescue package for the economy.

“The US senate should be drawing on the experience of its failure to act fast in the 2008 crisis,” he said.

“Instead, it has yet again failed to act responsibly in the 2020 crisis. The proposed economic stimulus package is massive, but the longer the delay, the more colossal it will need to be to appease the markets.”

And CMC Markets analyst Michael Hewson said the failure to get the bill through Congress “is sowing concern that US politicians simply don’t get it when it comes to the people they claim to represent”.

With an expected flood of dollars into financial markets, the greenback suffered a rare sell-off, having surged for the past few weeks.

It lost almost 4% against the Australian dollar, 3% against the New Zealand dollar and more than 1% to the South Korean won, Russian ruble and Turkish lira.

It was also lower against its major peers, with the euro up more than 1%.

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