Extremely volatile trading was present on global financial markets during the past week. VIX index, the fear gauge, rose to the highest level since the European debt crisis in 2011 as it reached the level of 42 points.
There were two major issues. Firstly, investors had to cope with new information about fast spreading of coronavirus epidemic around the world and secondly, investors had to cope with extraordinary emergency rate cut by the US Fed. US central bank slashed fed funds rate by 0.5 % on Tuesday. Fed did this during the global financial crisis in 2009 last time. Nevertheless global stock markets rose by 0.4 % for the whole week. On the other hand European equities declined by 2.4 %. Bonds showed again their diversification benefits as the global bond index gain solid 2.5 % for the whole week. Crude oil continued its rout declining by 10 %. However during the weekend OPEC and especially Saudi Arabia did not strike a deal with Russia about production cuts. As a result crude oil plummeted by additional more than 20 % at the beginning of this week! It will be very important to watch the ECB meeting this week. Investors expect that the ECB president Christine Lagarde will announce additional monetary policy easing. And of course, we will continue to follow closely the evolution of the coronavirus epidemic.
Michal Stupavský
Investment Strategist Conseq Investment Management, a.s.