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Wall Street rebounds 5% after its biggest drop since Black Monday 1987


Wall street it has rebounded on average more than 5% (Dow Jones: + 5.20%; S&P 500: + 5.99%; Nasdaq: + 6.23%) after suffering his biggest drop since 1987 (Dow Jones: -12.93%; S&P 500: -11.98%; Nasdaq: -12.32%). The New York Stock Exchange closed at the session lows after a press conference on Donald trump in which the American president acknowledged that the outbreak of coronavirus in the United States will not be contained until "July or August at the earliest." In addition, he stated that the country "could" suffer a recession for this crisis, as the market is discounting.

Investors only have eyes for the negative impact of the pandemic and consider that the measures of the Federal Reserve (Fed) they cannot solve this combined supply and demand shock caused by this health crisis. At least 4,281 cases have been confirmed in the US and 70 people have died, according to data from Johns Hopkins University

The American Central Bank cut interest rates by 100 basis points on Sunday night, down to 0% -0.25%; and announced the purchase of $ 700 billion in Treasury bonds and mortgage-backed securities (new QE program), in one of the largest monetary stimuli in history, which, however, failed to curb panic in the stock markets.

This Monday, it also injected another 500,000 million dollars in repurchase operations to guarantee liquidity and this Tuesday it has reactivated a tool from the 2008 crisis through which will buy commercial paper to guarantee credit to companies and households.

For his part, the American Treasury Secretary, Steven Mnuchinwants to promote a economic stimulus plan valued at $ 1 trillion to counteract the negative impact of the coronavirus on economic activity.

Commissioned by Donald Trump, Mnuchin will visit Congress this Tuesday to seek the support of the republican party, since the plan must obtain the approval of the Capitol. This news has been well received by investors.

In other markets, the profitability of 10-year American bond It rebounded strongly 30 basis points to 1.02%, while the euro it depreciates very strongly by 1.5%, and changes to $ 1,1007. In addition, oil falls 6% in the case of West texas, up to $ 27. For his part, the VIX volatility index, known as the fear index, shot up 44%, to 82.69 points, its highest close in history, above the 80.74 points recorded in the 2008 financial crisis (this Tuesday it fell 8%, to 75.53 points) .

On the business scene, Amazon will expand its US workforce by 100,000 workers to cope with the increase in demand as a result of the containment measures applied to contain the epidemic.

On a technical level, the S&P 500 It rebounds to 2,520 points after hitting a low of 2,380 integers on Monday. The main world indicator has important support among 2,315 and the 2,400 integers, the lows of the last major correction of the twenty% occurred at the end of 2018.


The market fears that Donald trump lose control over the coronavirus in U.S, according to AXA Investment Managers. David Page, strategist of the firm, affirms that "there is concern that the number (of infected) still remains low (in the US) due to difficulties in testing"

In his opinion, this "suggests a larger problem." Therefore, it indicates that "uncertainty about scale of Covid-19 impact remains high"

"We haven't seen an escalation urgent enough in testing, isolation and contact tracing, which is the backbone of the response, "said WHO Director-General, Tedros Adhanom Ghebreyesus. "We have a simple message for all countries: test, test, test," he added, referring indirectly to the US.

In a country of 327 million inhabitants, of which some 27 million do not have health coverage, the doubts about the containment of Covid-19 are many. "In United States, 27 million people do not have health coverage. Frankly, I think it will be very difficult for them to control the epidemic"Rafael Bengoa, a former WHO adviser and a former health adviser in the Basque Country, commented.

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