Britain Closes Down, Wall St Slides Despite More Fed Intervention

By Glenn Dyer | More Articles by Glenn Dyer

Wall Street fell again despite the US Federal Reserve saying it would vastly expand its efforts to shore up businesses and keep markets functioning.

In Washington, Congress failed to reach an agreement for a second time to approve a record-breaking fiscal stimulus package.

The market fell 4%, but overnight trading on the ASX 200 futures platform was up around 40 points (after being much higher at 6 am).

The Dow fell 582 points, or 3% to close at 18,591, the S&P 500 dropped 68 points, or 2.9% to end the session at around 2,237 but the Nasdaq only lost 19 points, or 0.3% to close at around 6,860.

Investors are simply waiting for the Republicans and Democrats to reach an agreement on the massive stimulus package which could be as high as $US2 trillion.

The lack of agreement undermined the Fed’s biggest intervention to date – it amounts to an open-ended check to help support markets.

The massive central bank support did push down US borrowing costs on Monday, but equity investors are waiting for Congress to act.

That Fed move – which will see it buy Treasuries as well as securities linked to corporate bonds and mortgages – saw the yield on the 10-year Treasury bond fall 8.6 basis points at 0.76%.

That, in turn, saw the US dollar weakened and the Aussie traded around close to 58 US cents just after 7 am Sydney time. The 57.90 level was up o the session low of 57 US cents.

Just after 7 am Sydney time Tuesday the most dramatic news from London saw Prime Minister Boris Johnson close Britain for the next three weeks.

In a televised address the PM announced the closure of all “non-essential shops”, told people to stay at home and warned that the police would enforce tough new measures to stop the rapid spread of coronavirus.

After days of mounting pressure to do more, Mr. Johnson said that people should stay in their homes unless they had a good reason to leave and that high streets would be largely shut down.

He said all shops selling non-essential items will be forced to close, including clothing and electronic stores, while gatherings of more than two people will be dispersed by police (echoing Germany’s new restriction on gatherings).

He added that social events, such as weddings and baptisms will be banned, meaning people can only gather in large groups for funerals.

“You should not be meeting friends. If your friends ask you to meet, you should say ‘No,’” Johnson added. “You should not be meeting family members who do not live in your home.

“You should not be going shopping except for essentials like food and medicine — and you should do this as little as you can. And use food delivery services where you can,” he said.

The ASX 200 closed at the lowest level since December 7, 2012, on Monday 5.6% or 270 points was lopped by nervy investors.
It would have been a larger fall (as it was it sagged lower on settlement) but for a sharp rebound in the CSL.

Late buying in healthcare giant CSL helped to limit the falls on the broader market, closing up 4.2% at $282.24 having been down over 10% earlier in the session. The rally saw the healthcare index rise 2.6% for the session, making it the top performer on Monday.

The key market measure is now down 36.6% from the high on February 20.

Financials led the way lower, the sector shedding a massive 10.2% – not as big as the 11.1% slump on March 16, but bad enough.

Naturally, the major retail banks were sold off again. Commonwealth Bank fell 9.4% to $54.26, Westpac closed 10.6% lower at $14.10, ANZ Bank fell 12% to $14.10 and NAB reached the lowest price since November 1996 in trading before closing off 11.4% at $13.88.

Macquarie Bank dropped 15.3% to $72.02, taking it back to prices not seen since July 2016. Investors see it as a big loser because of its wide exposure to all financial markets which have tanked.

The consumer discretionary sector fell by 8.3%, dragged down by a 6.8% fall in Wesfarmers to $31.02, Aristocrat Leisure fell which lost 12%, Tabcorp fell 13%, and Premier Investments which fell 25% to $8.95.

Real estate stocks dropped with the sector down 11.3%. Charter Hall saw the biggest loss – a whopping, 26.2%, while Abacus Property wasn’t too far behind with a loss of 26%.

Afterpay Touch plunged 28% to $8.90 yesterday as the buy now pay later sector hit the wall. That will be a sector to watch today.

Apart from CSL, Telstra, the much-derided stalwart, notched a 0.6% gain to $3.09 as despite downgrades from analysts because of its move to delay a lot of job cuts and lift spending this year to keep people in employment.

Credit Suisse analysts said Telstra is more than capable of handling its debt obligations and should be able to maintain its 16 cents a share dividend, for a yield of over 5%, for the time being.

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

View more articles by Glenn Dyer →