Coronavirus crisis retains grip on volatile global markets

Coronavirus crisis retains grip on volatile global markets

Shekel soars across the board as British pound plummets, US dollar hits 17-year high against major currencies; BATM surges on TASE on hopes of rapid virus testing kit

People walk by an electronic stock board of a securities firm in Tokyo, March 19, 2020 as shares in Asia failed to hold onto opening gains. (AP Photo/Koji Sasahara)
People walk by an electronic stock board of a securities firm in Tokyo, March 19, 2020 as shares in Asia failed to hold onto opening gains. (AP Photo/Koji Sasahara)

Stocks seesawed between gains and losses in midday trading on Wall Street Thursday, but the moves were more subdued than the wild jabs that have dominated recent weeks.

The S&P 500 was up 1.5% after bouncing back from a loss of 3.3%. That would be a notable change in normal times, but the index has had eight straight days where it swung up or down between 4.9% and 12%.

Markets have been so volatile because investors are weighing the increasing likelihood of a recession on the one hand against huge, emergency efforts by global authorities to support the economy on the other. Markets got more of each on Thursday.

The number of Americans filing for unemployment benefits jumped by 70,000 last week, more than economists expected, in one of the first signs of layoffs sweeping across the US. Wide swaths of the economy are grinding closer to a standstill, from the travel industry to restaurants, as authorities ask Americans to stay home to slow the spread of the novel coronavirus. Another weak manufacturing report, this time in the mid-Atlantic region, added to the worries.

A stock market ticker screen in the empty lobby of the Tel Aviv Stock Exchange, March 15, 2020. (Flash90)

But the world’s largest central banks announced their latest efforts to support financial markets and the economy. The European Central Bank launched an expanded program to buy up to 750 billion euros ($820 billion) in bonds to support the economy, and the Bank of England cut its key interest rate to a record low of 0.1%.

The Federal Reserve unveiled measures to support money-market funds and the borrowing of dollars as investors in markets worldwide rush to build up dollars and cash. The dash for cash has strained markets, and sellers of even high-quality bonds say they’re having difficulty finding buyers at reasonable prices for how much they want to sell. Many of the Fed’s moves, which are getting revived after being used in the 2008 financial crisis, are aimed at smoothing out operations in such markets.

“They’re throwing everything at this, and it doesn’t seem to be as effective,” said Sal Bruno, chief investment officer at IndexIQ. The market will likely remain volatile until investors see more economic data that shows just how badly the outbreak is hurting the economy.

“They’re doing what they can, and I’m not sure what else they can do,” Bruno said.

In Israel the shekel soared, gaining 3.8% against the dollar despite the American currency hitting 17-year highs against a basket of the major currencies. Pound Sterling slumped by 5.8% against the shekel, which was also up 5.2% against the euro.

The massive gains by the shekel followed the Bank of Israel’s decision Wednesday to pump $15 billion from its foreign exchange reserves into the banking system to reverse a slide in the shekel.

A currency exchange shows the tourist rates they are offering for the British pound against the US dollar and the euro in central London, March 19, 2020. (AP Photo/Alastair Grant)

The Tel Aviv Stock Exchange ended the day up sharply, but was still down for the week. The TA-35 index of major stocks jumped 4.1%, while the TA-125 was up 4.4% and the Banks Index surged 8.1%. For the week as a whole, TA-35 was down 1.7%, TA-125 slipped back by 2.8% and the Banks Index lost 6.1%. No trade takes place in Israel Friday.

BATM soared by 36% after joining up with Israeli life sciences company Novamed to develop a rapid COVID-19 home-testing kits that it hopes to receive regulatory sign-off on within four months. The kit will analyze a sputum sample and return an answer within minutes.

The Dow Jones Industrial Average was up 146 points, or 0.7%, at 20,045 as of 11:25 a.m. Eastern time. It had earlier swung between a loss of 721 points and a gain of 244 points. The Nasdaq was up 2.9%.

The S&P 500, which drives movements for most 401(k) accounts more than other indexes, is down roughly 29% since its record exactly a month ago and close to its lowest point since late 2018.

European stocks swung from gains to losses and back to gains. Asian markets dropped following the brutal 5.1% loss for US stocks the prior day. Crude oil clawed back some of its steep loses from the day before, and benchmark US oil rose back above $24 per barrel.

Ultimately, investors say they need to see the number of new infections stop accelerating for the market’s extreme volatility to ease.

The total number of known infections has topped 220,000 worldwide, including nearly 85,000 people who had recovered. The death toll has crept toward 10,000.

Until the number of new cases peaks, investors will struggle with uncertainty about how much to pay for a stock, bond or commodity when they don’t know how long the economic downturn will last. Many economists expect a sharp drop in the economy, but they disagree on how long it will take to bounce back.

The hope is that all the emergency actions by central banks and spending by governments can provide support for the economy in the meantime and soften the blow. The Trump administration has pitched lawmakers on a program that could flood $1 trillion into the economy, including checks sent directly to households.

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