FXTM: 'fear of the pandemic is taking control of investors'
Global investors are succumbing to fears about the ultimate economic impact of the COVID-19 virus, said Hussein Sayed, chief market strategist at FXTM. U.S. stock-market futures hit their daily limit-down level in electronic trading Sunday night, then the so-called “circuit breaker” temporary closure was triggered after Wall Street opened sharply lower Monday morning. All of this came after the Federal Reserve slashed its benchmark interest rate to zero and announced quantitative easing on Sunday. “The coronavirus outbreak is proving to be stronger than any measures taken by governments and central banks,” Sayed said. Other central banks also announced measures, including China, where the coronavirus outbreak hit first. “It’s becoming evident that the major central banks across the globe are using all their available tools to prevent a crisis, but it seems the fear of the pandemic is taking control of investors,” Sayed commented. The longer the outbreak and emergency measures last, the harder the global economy will be hit. “A recession seems almost impossible to prevent at this stage, but the question remains, how bad is it going to be?” Sayed cited Chinese economic data released Monday as an example of how bad conditions could become. “Industrial production plunged 13.5% in the first two months of the year; that’s the worst reading ever for the sector,” Sayed said. “Retail sales fell 20.5% as consumers were locked at home, fixed-income investments dropped 24.5%, and the jobless rate rose to a record 6.2%. While China has started to recover from the epidemic, we do not expect to see a V-shaped recovery.”