Yesterday evening, the S&P 500 opened up nearly 2%, and the Dow rose nearly 400 points. Only about 20 minutes after the market opened, all three major stock indexes turned green. Among them, the Dow Jones Industrial Average’s decline expanded to more than 200 points, falling below the 20,000-point mark for the first time in more than three years.
Seeing that the situation was not good, the New York Fed announced one hour after the U.S. stock market opened that the Federal Reserve would conduct a Additional overnight repurchase operations, with a scale of $500 billion. Just yesterday, the Federal Reserve conducted an overnight repurchase operation worth $500 billion, with a minimum bid rate of 0.1%. Affected by this news, U.S. stocks quickly stopped falling and rebounded. The Dow Jones Industrial Average rose more than a thousand points in one hour, and the Nasdaq Composite Index and the S&P 500 Index rose more than 6%.
As of the close, the Dow rose 5.20% to 21,237 points, the S&P 500 rose 5.99% to 2,528 points, and the Nasdaq rose 6.23% to 7,334 points. A CCTV financial commentator said that the rebound in U.S. stocks was mainly due to the epidemic briefing held by the White House on the morning of the 17th local time. Earlier news said that the Trump administration is preparing to launch an economic stimulus plan of more than one trillion US dollars. At today’s briefing, Trump, as well as Treasury Secretary Mnuchin, further elaborated on the details of this trillion US dollars. plan, thereby giving the market a certain degree of confidence. In addition, it was revealed that financial regulators are also considering further relaxing bank liquidity. This morning the Federal Reserve announced a series of monetary policies, including an additional overnight repurchase operation of up to $500 billion and the establishment of a commercial paper financing facility to support the flow of credit to households and businesses. Therefore, the White House and the Federal Reserve adopted a two-pronged approach on fiscal policy and monetary policy, allowing U.S. stocks to at least have a solid one-day rebound at the close. However, when the stock market rebounded, the VIX index only fell by 6.78 points and remained at a high level close to 76 points. This is a very important signal, and the boost to market confidence seems to be quite limited.
In terms of commodity futures, WTI crude oil fell 6.52%; Brent crude oil fell 2.99%; London copper fell 2.65%; gold rose 0.96%. U.S. soybean meal rose 0.89%; U.S. soybean oil rose 0.52%; U.S. sugar fell 2.08%; U.S. cotton fell 1.70%.
It is worth noting that Bridgewater Associates, the world’s largest hedge fund, shorted US$14 billion in European stock markets early yesterday morning Beijing time. Italy, France and Belgium all issued short selling bans yesterday afternoon. The Italian Securities and Exchange Commission issued a ban on short selling of 20 Italian stock exchanges (MTA) stocks. French Finance Minister Bruno Le Maire said that France will ban short selling in the next 24 hours and may extend the short selling ban. The Philippines even became the first country in the world to shut down its financial market. The Philippine Stock Exchange announced that it will be closed indefinitely from March 17, and currency and bond trading has also been suspended. It will wait to be notified when trading will resume.
The development of the global epidemic is the key, and the adjustment of US stocks may continue
According to market participants, the core variable affecting the trend of U.S. stocks in the short term is still the development of the global epidemic.
On the one hand, the number of confirmed cases in the United States may be significantly underestimated. The first officially confirmed case was announced on January 20. The first confirmed case was confirmed based on the experience of other countries. During the time interval between outbreaks, the epidemic has already or has already broken out on a large scale in the United States. The low number of official confirmed cases is mainly related to the serious shortage of testing reagents, the few testing sites, and the high testing costs. With the testing pilot and large-scale release of reagents, The next one to two weeks will also see a significant increase in the number of confirmed cases in the United States.
On the other hand, the current debt of non-financial companies in the United States is at the highest level in history. The energy industry accounts for the largest proportion of low-grade debt, but the interest rate level has dropped to a historical low. During the epidemic, Under the impact of the oil price war, U.S. companies may have a debt crisis, and monetary policy space is insufficient to deal with it. Therefore, from the perspective of the development of the epidemic and corporate debt, the adjustment of U.S. stocks is not yet over.
Amidst the global downturn, it is difficult for A-shares to survive alone and has maintained a weak trend recently. At yesterday’s closing, the Shanghai Stock Exchange Index fell 0.34% to 2779.64 points; the Shenzhen Component Index fell 0.49% to 10202.75 points; the GEM Index rose 0.36% to 1917.70 points. Northbound funds had a net outflow of 8.238 billion yuan throughout the day, marking the fifth consecutive day of net outflows; northbound funds turned net outflows during the year, with a cumulative net outflow of 4.244 billion yuan.
Guangzhou Futures stock index analyst Guo Ziran told reporters that the recent weak stock index trends are mainly due to the sharp decline in the external market and the failure of domestic interest rate cut expectations. On the one hand, the U.S. stock market suffered its largest single-day decline in history on Monday due to the accelerated spread of the local epidemic and the heightened market panic caused by the Federal Reserve’s “all-in” policy. At the same time, the central bank launched a 100 billion yuan MLF operation on March 16, but the interest rate was unexpected. It remained the same as last time, and there was no interest rate cut expected by the market, which put the index under certain adjustment pressure.
Guo Ziran said that the domestic stock index will be affected by the external market in the short term, but the extent of adjustment is relatively limited. First, the domestic epidemic is basically under control, and second, the valuation level of A-shares is relatively low. Third, domestic policy space is relatively sufficient. “With the recent high risk in the external market, it is difficult for the domestic index to move out of an independent upward trend. With the full resumption of business and the implementation of fiscal policies, funds are gradually flowing back into the real economy. In addition, short-term interest rate cut expectations have been disappointed, and market liquidity may be marginal. tighten, ���The market style will further switch to weight. After the number of new cases in the world and the United States reaches an inflection point, the domestic index will rebound significantly along with the external market. In the medium to long term, due to excessive macro leverage, it is difficult for domestic policies to be as large-scale as in the past. Coupled with the weak endogenous economic momentum, domestic indexes are more structural, represented by GEM and CSI 500. The market is dominated by the market, and the overall room for the index to rise is limited. “Guo Ziran said.
From the perspective of stock allocation, CITIC Securities believes that new and old infrastructure and related technology leaders (5G, cloud computing, IDC, etc.) are still the main line of allocation throughout the year . For the technology sector, after this round of correction, the current GEM index, Shanghai Composite 50, CSI 300 and other important index PEGs have converged. Therefore, as long as the GEM can continue to deliver performance in line with expectations, the valuation is currently not expensive. In addition, the current technology Entering the “calibration period” of performance, technology white horses supported by performance have continued allocation value, including consumer electronics, semiconductors, new energy vehicles, and 5G in “hard technology”; cloud computing in “soft technology”, and “soft technology” Innovative drugs, CDMOs, etc. in “biotechnology”.
The market has deflationary expectations, and silver has plummeted in a “waterfall”
Recently, global panic has risen rapidly, with the VIX risk aversion index approaching a high of 70, financial market liquidity problems and debt default risks intensifying, and silver prices continuing to decline during the crisis.
Especially on the evening of March 16, silver fell to as low as $11.77 per ounce during the day, a new low in more than ten years, with a maximum drop of 20%. With silver’s waterfall-like plunge, gold did not appear The same magnitude of decline caused the price of gold and silver to soar.
CITIC Futures Precious Metals Analyst Yang Li He said that looking back at the performance of silver assets in previous crises can be roughly divided into two stages: the initial risk aversion dominated, risk assets fell, and funds entered safe assets; the expansion of the crisis, the increased decline in risk assets, and the depletion of liquidity led to safe haven assets and risk assets Differentiation weakened, and both volume and price fell.
“The Federal Reserve’s long-term low interest rate environment has stimulated companies to increase their leverage ratios and promoted the prosperity of financial markets. Market interest rates have remained low for a long time, forcing companies to seek high-risk returns. The simplest, quickest and most effective way is to increase leverage. When assets fall sharply, they can only continue to sell off assets and move to safer U.S. dollar cash and government bonds. “Yang Li said that the strong return of the U.S. dollar and U.S. bond yields is a direct reflection of the demand for safe havens. Because silver’s financial attributes are weaker than gold, and its industrial attributes are stronger than gold, it has been more negatively affected by this crisis. The bigger the price is, the more the price will fall.
In the view of Wang Jun, a precious metal analyst at Minmetals Economic Futures, the current sharp drop in gold and silver is due to the financial aspect. Previously, gold and silver had accumulated large net long positions. As long as the bullish positions were crowded, the stampede would be violent when the market fell. From a logical perspective, the sharp decline in nominal interest rates on U.S. debt under the influence of the epidemic has basically fulfilled the decline in the U.S. economy and the In anticipation of an interest rate cut by the Federal Reserve, nominal interest rates have rebounded slightly after central banks of various countries have cut interest rates. The slump in the stock market, crude oil and other commodities has created deflationary expectations in the market. The above has given real interest rates some momentum to pick up, which is not conducive to the continued rise of gold and silver. In crisis mode , the logical balance of precious metals has switched from risk aversion to deflation. In addition, the Federal Reserve’s excessive and rapid interest rate cuts have also panicked the market, thus exacerbating the market’s liquidity crisis. At the commodity level, precious metals, especially silver exchange inventories, have hit record highs. This shows that downstream demand is weak, so it is reasonable for silver to plummet and the gold-silver ratio to hit a record high.
As for the market outlook, Yang Li believes that the market is looking forward to subsequent monetary and fiscal policy stimulus. Powell’s statement that he would not consider negative interest rate policy disappointed the market. Combined with the limited quantitative easing during last week’s European Central Bank interest rate meeting, if the follow-up space of the US and European central banks’ stimulus policies is limited, silver is expected to continue to drop. The current epidemic has led to the suspension of work and school overseas, and social activities have slowed down. The overall demand has declined, the industrial attributes of silver have been further suppressed, and the high domestic and foreign silver inventories will also have an adverse impact on silver prices.
“The epidemic has led to deflation, and gold and silver have The capital stampede has led to a tragic decline, and the risk of mid-line decline may not be fully released. Although there is a possibility of a short-term rebound, there are still opportunities for short selling after the rebound. In the long term, it is a foregone conclusion that the world will maintain low interest rates and monetary easing. When long-term interest rates are low, gold and silver are still worthy of allocation after they fall to relatively low levels. “Wang Jun said.</p
