Markets welcomed the Federal Reserve’s second wave of rescue actions, which includes open-ended bond buying. The S&P500, which at one stage was down 5% (for a total 35% since the high in February), is currently down 2.8%. The US dollar and bond yields are slightly lower, allowing the AUD and NZD to hold ground, while commodities fell further.

Markets shifted back into risk averse mode on Friday, unnerved by the scale of lockdowns in the EU and US. The S&P500 closed down 4.3% to the lowest close since February 2017. It has lost 32% over the past month. Commodity prices also fell, as did bond yields. Currencies were mixed.

Some semblance of calm appeared overnight as recent government and central bank actions to normalise markets were welcome. The S&P500 is up 1.4% currently, commodities and the AUD and NZD also recording gains. Bond yields fell.

Fear and panic returned to markets overnight. The S&P500 is down 8.3%, commodities are lower, the US dollar is higher, and the AUD/NZD cross broke below 1.0000 for the first time. Bond market routs continued, sending global term yields higher. Uncertainty about COVID-19’s duration and thus the economic downturn remained the main driver.

Government stimulus on a massive scale helped lift sentiment in European and US equity markets, the S&P500 currently up 4.5%. Commodities are lower, though, and the defensive USD is higher, resulting in fresh lows in the AUD and NZD. Bond yields again rose, perhaps reflecting the expected rise in government debt levels.

Equity markets remained in panic mode. The S&P500 is currently down 10.8%, and was down 11.5% at the overnight low. Commodities are also lower, oil down 14%. US bond yields are slightly higher and the US dollar is slightly lower – both inconsistent with the mood in equity markets. The dominant theme remains concern about the severity of the global economic slowdown.

US equity markets rose on Friday after the US President declared a national emergency and pledged to do whatever it takes to protect the economy from the pandemic. The S&P500 rose 9.3% - the largest one-day gain since 2010 – and commodities also recorded gains. Bond yields perversely rose as liquidation of “safe” assets continued. The Bank of Canada cut its rate 50bp, and this morning the RBNZ surprised with a -75bp move.

Market panic intensified overnight as governments around the world announced fresh containment measures. The S&P500 is down 8.5%, and made a fresh low since 2009. Many major equity markets recorded their largest one-day falls since 1987. Liquidation appeared to be widespread across equities, bonds, commodities, and currencies. The ECB announced new funding schemes following its policy meeting, and the Fed unexpectedly announced very large cash injections and extended asset purchases.

US equity markets swung back into fear mode, the S&P500 currently down 5.5% to a fresh one-year low. Commodities also fell, while currencies saw only modest moves and government bond markets were unfazed. Markets appeared concerned at: the lack of US Government response to date, the WHO officially declaring COVID-19 a pandemic, and the number of new cases ex-China rose sharply. The BoE cut its policy rate by 50bp outside its regular meetings.

Coronavirus fears were assuaged by governments’ pledges to fiscally assist, helping the S&P500 stabilise. It is currently up 2.7%, and bond yields, commodities, and the US dollar are higher.