Coronavirus: US stocks surge as Federal Reserve cuts rate
Fed met after warnings and took unanimous vote to cut the rate to a range of 1% to 1.25%
An American flag flies outside the Marriner S. Eccles Federal Reserve building in Washington.
US stocks surged with two-year treasuries after the Federal Reserve announced an emergency rate cut to combat the economic effects of the coronavirus.
The SandP 500 spiked to a session high and the two-year Treasury yield tumbled after the central bank shaved 50 basis points of its benchmark rate.
Stocks started lower after G7 finance ministers and central bankers stopped short of taking action after a 7am call. That changed after the Fed met and took a unanimous vote to cut the rate to a range of 1 per cent to 1.25 per cent.
“The coronavirus poses evolving risks to economic activity,” the Fed said in a statement.
The central bank also said it is “closely monitoring developments and their implications for the economic outlook and will use its tools and act as appropriate to support the economy”.
Investors had piled out of risk assets last week as the spreading virus threatened to derail global growth, only to pour back in Monday in anticipation of concerted action from G7 officials.
Oil continued its rebound Tuesday, approaching $48 a barrel, while gold also rose. The yen was higher versus the dollar.
The OECD warned that growth will sink to levels not seen in more than a decade and ever more businesses are warning about the impact of the illness. US president Donald Trump said on Tuesday the Federal Reserve “should ease and cut rate big”.
The governor of the Bank of England, Mark Carney, said it would take all necessary steps to help the economy.
Australia lowered its benchmark by a quarter percentage point. Its currency rose, however, underscoring how traders’ expectations have rapidly shifted in recent days. – Bloomberg