In the past week, with the outbreak of the new coronavirus pneumonia in many countries and the discovery of the "black swan" in the international crude oil market, the global stock market has taken turns with circuit breakers, including the US stock market triggering two level 1 circuit breakers. Investor panic is soaring, from Asia Pacific markets to European markets, global financial markets have a rare "big earthquake".
Fed's "zero interest rate" rescue
In order to help the United States through the economic crisis, the Federal Reserve Board announced on March 15 that it would sharply reduce the federal funds rate by 100 basis points to the range of 0-0.25%, and launch a large-scale QE program of 700 billion dollars, in order to support the healthy and stable development of the economy during this period, and help to ease the liquidity problems in the financial market last week. The new "quantitative easing" policy, the biggest one-day move ever by the central bank, will officially start on March 16.
Central banks scale up measures
The occurrence of the storm disrupted the global economy, in order to deal with the impact of the "black swan" event, in addition to the Federal Reserve, the central banks of all countries are also "rescue" firepower.
Rba: Ready to buy government bonds
The Reserve Bank of Australia said it stood ready to buy government bonds to support the smooth functioning of markets and was ready to announce further economic support policies on March 12.
In addition, the Reserve Bank of Australia has again injected large amounts of money into the financial system to counter the panic selling in global markets triggered by the coronavirus. The Reserve Bank of Australia injected A $5.9 billion, or $3.64 billion, into the system through general repurchase agreements in its daily money market operations, much larger than the A $2.5 billion originally expected. The Fed injected A $8.8 billion on March 13.
Bank of Canada: Another emergency rate cut of 50 basis points on Friday
On Friday, the Bank of Canada made another emergency rate cut, lowering its key overnight rate by 50 basis points to 0.75 per cent.
The Bank of Canada said that as long as it is consistent with the objectives of supporting the economy and maintaining inflation, the central bank is ready to further adjust monetary policy, and the central bank rate cut is a forward-looking measure. Bank of Canada Governor Poloz said the Bank of Canada was prepared to do "whatever it takes" to support the economy. On the same day, Trudeau announced that the Canadian government would introduce some major stimulus measures to boost the economy, calling on Canadians to cancel or postpone overseas travel.
China's central bank: Target RRR cut 0.5 to 1 percentage point
The People's Bank of China decided to implement a targeted RRR cut for inclusive finance on March 16, 2020, and a targeted RRR cut of 0.5 to 1 percentage point for banks that meet the assessment standards. In addition, qualified joint-stock commercial banks will be targeted to cut the required reserve ratio by an additional 1 percentage point to support the issuance of loans in the field of inclusive finance. The above targeted RRR cuts released a total of 550 billion yuan in long-term funds.
The People's Bank of China has implemented a prudent monetary policy, made it more flexible and appropriate, and given more priority to supporting the recovery and development of the real economy. It has also maintained reasonable and abundant liquidity, and the growth of money and credit and social financing is in line with economic development, so as to create a suitable monetary and financial environment for high-quality development and supply-side structural reform.
In addition, the Reserve Bank of New Zealand and China's Hong Kong Monetary Authority also announced emergency interest rate cuts on Monday; The Bank of Japan brought forward a monetary policy meeting scheduled for Thursday to Monday; Italy imposed a total short-selling ban; Thailand temporarily adjusted short-selling rules; South Korea imposed a six-month ban on short-selling.
Market liquidity is expected to increase, and market mechanisms are gradually being restored
In the context of global linkage, the impact of the market is closely related, and the central banks of various countries have played a set of combined fists for the financial "big earthquake", hoping to provide sufficient liquidity for the market. From the basic point of view, the market generally believes that based on China's economic fundamentals, the effective control of the epidemic, and the support of new infrastructure investment expectations, the risk of A-shares is relatively small.
Source: FX110
