The markets charge back to life—with a little help from the Fed

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Good evening, Bull Sheeters! This is Coins2Day finance reporter Rey Mashayekhi, filling in this week for Bernhard Warner. We’re trying something new: To orient you on Asia and U.S. Markets, I’ll be sending you a special evening (or morning, for those of you in Asia) edition of the newsletter. We’ll be back to regular scheduling next week.

In what are tumultuous times for the global financial markets, I’ll do my best to keep this ship of ours sailing smoothly as businesses and investors navigate the fallout from the ongoing coronavirus outbreak. And that’s exactly where we will begin today’s discussion: Last week saw markets around the globe lose trillions in value thanks to fears of the outbreak’s hugely disruptive potential.

But it appears investors were prepared to buy the dip—because the bull market returned on Monday in triumphant fashion.

Markets update

In Asia, the epicenter of the coronavirus scare, the major indices all rebounded to start the week. Tokyo’s Nikkei index was up nearly 1% while Hong Kong’s Hang Seng showed more modest gains, but the real success story was on mainland China, where the major Shanghai and Shenzhen stock market indices climbed more than 3% each.

The outbreak has decimated factory output in mainland China. Official PMIs released by Beijing over the weekend showed severe contraction in February—but that didn’t stop the markets from starting the week strong amid signs that the worst of the outbreak has headed elsewhere. According to the World Health Organization, the virus is now spreading faster outside of China.

Moving westward, Europe’s major indices also showed signs of life, with the FTSE up more than 1%. But that paled in comparison to the rally seen in New York on Monday, where the Dow climbed nearly 1,300 points, or more than 5%, and the Nasdaq and S&P 500 also each gained more than 4%. It was a sorely-needed shot in the arm for the major U.S. Markets, all of which fell into correction territory last week with losses exceeding 10%.

So what’s driving this healthy rebound? One cannot discount the calming effect of an accommodative central banking policy—and that’s exactly what investors got after Federal Reserve chairman Jerome Powell indicated that the Fed is prepared to cut interest rates this month to help shelter the U.S. Economy from the impact of the coronavirus outbreak. That sentiment has since been echoed by policymakers elsewhere, most notably in Japan and Europe—though some have doubts over whether monetary policy alone can lift the markets out of this rut.

Indeed, there are signs that investors are still wary; 10-year U.S. Treasury yields hit record lows during trading on Monday. Elsewhere, crude oil prices rebounded after taking a pounding last week, while gold was up and the dollar was down.

That’s all for now. Have a pleasant evening and see you tomorrow.

Rey Mashayekhi
@reym12
[email protected]

Today's reads

Earnings hurt. My Coins2Day colleague Anne Sraders documents how the coronavirus outbreak has hit corporate America's bottom line (and, in turn, the pockets of shareholders). Companies as varied as Apple, Mastercard, Marriott, and Coca-Cola all anticipate feeling the pain, with the outbreak stunting what's been several years of mostly robust earnings growth for American companies. The good news is that the impact should be "transitory, not permanent," according to one analyst.

Technical difficulties. Who didn't get to ride the stock market rally on Monday? Robinhood users. The popular stock trading app crashed in the morning and was out of service the entire day, as my colleague Jeff John Roberts reports. It's a major blow for the fintech startup, which has targeted millennials on the way to a valuation exceeding $7 billion but has had to answer its fair share of controversies in recent times.

Going public. Meanwhile, startups like Public are coming for some of Robinhood's market share, not to mention that of established players like Charles Schwab and E-Trade. The company announced a $15 million investment led by venture capital firms Accel and Greycroft, and also counts the likes of actor Will Smith and NFL star J.J. Watt among its backers. Public's differentiator? A "Pinterest-like social media environment" that lets retail investors interact with each other.