US markets are roaring ahead again, after Jerome Powell’s promise of more actions if needed outweighed a shocking rise in US jobless claims.
Those who thought that the passage of the $2 trillion stimulus might be time to ‘sell the news’ have been caught out, with an impressive rebound across Wall Street. Even the highest ever initial jobless claims figure has been unable to dent the boundless confidence apparent in US markets, perhaps because like European PMIs earlier in the week, everyone ‘knew’ it would be bad. And even a reading much worse than expected could do little against the tide of buying in equities – best to get all the bad news out now, or at least as quickly as possible, so everyone can focus on the recovery. Plus there was the magic of a Jerome Powell TV interview, with the very fact of the Fed chairman appearing on national TV acting as a calming factor, along with his pledge that the Fed would continue to find the ammunition it needed. Central bankers look set to become rock stars again, as they throw away the rule book on stimulus.
Having already cut rates and gone for more QE, new BoE chairman Andrew Bailey was not likely to make many more dramatic moves in today’s BoE decision. Their warning of a ‘sharp’ downturn also chimes with what everyone else expects, thus diminishing the impact of the warning. But the recent rebound in risk assets is predicated on a relatively quick recovery from the virus – should the downturn be sharp but prolonged as well, or if lockdown measures have to stay in place for much longer than anticipated, then a swifter revival of the stock market seems very much in doubt.
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