Fundamental Comment

Mixed sentiment in financial markets after Fed’s surprise cut

Mixed sentiment in financial markets after Fed’s surprise cut

Financial markets are showing mixed sentiment on Wednesday following yesterday’s off-schedule interest rate cut by the Federal Reserve, as the surprise move failed to reassure investors.

Asian shares ended on a mixed note, as equities on Wall Street finished in red overnight despite the Fed’s 50-basis point, which is the first unscheduled action since the financial crisis a decade ago.

Bonds remained the most attractive safe haven, where the yield on the U.S. 10-year treasury dropped to a new record low of 0.935 percent on Tuesday, while it is currently hovering near it at 0.957 percent.

In the currency market, the Swiss franc is currently trading higher versus major currencies amid safety demand after the rapid spread of the coronavirus in the United States and India.

Global death toll from Covid-19 now stands at 3,190, which will probably prompt more global action to prevent the spread of the disease and mitigate its negative economic impact.

Last night, the World Bank announced a $12 billion package for countries suffering to deal with the health and economic damages of the virus.

Later in the day, the Bank of Canada is widely expected follow the suit of the Fed by cutting interest rates to 1.25 percent from the current 1.75 percent.

Fed Chair Jerome Powell had highlighted the limited impact of the monetary policy on containing the disease, raising concerns about the potential economic damages from the coronavirus.

China’s services Caixin PMI tumbled into the contraction area as the reading nearly halved to 26.5 in February, down from 51.8 in January, coming far below analysts’ projections of 48.0.

The sentiment will probably remain mixed as some investors try to gain confidence from the global coordination to contain the virus, while others would remain stick to safety.

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