Morning briefing:
Amid rising fears of impact of COVID 19 on global economy, the global central banks are looking upon reducing the interest rates, to drive the economic activity.
Yesterday evening, US Fed surprisingly, slashed down the interest rates by 50 bps to 1%. In around Dec 2019, before virus outbreak, US Fed stated that there was room for increase in the rates in 2020-21, for achieving desired inflation.
Cut in interest rates normally has a positive move on stock markets. But, US markets in turn, have reacting negatively by shedding (DJIA) 785 points, a 2.94% fall. It seems from market's reaction that they are now perceiving a severe impact of covid on US & global economy.
In fact, even before the rate cut, yesterday morning (IST), the US bond markets also indicated something.
The 10 year US Treasury bond yield has dropped to life time low of 1.13% and now at 0.965%. Markets perceive US treasuries as safe haven, thus holding the bonds for 10 years at a negligible return of 0.9%. Thus, resulting in increased bond prices and decreased yields.
These factors are indicators of severity of the impact on the global economic activity due to coronavirus.
Human resources are very strength of any economy. Demographics drive the nature and pace of economic activity. When disruptions lead, resources deplete, economy sees a downturn.
Sitting here and writing down my thoughts, I can just wish and hope for the cure to be available soon for the goodness of mankind.
Comments