JAKARTA (TheInsiderStories) – Asian market try to stabilize after major global stock market plunged on Monday as speculation of coordinated stimulus from global central banks and governments calmed panic selling. United States’ (US) Wall Street and European stock markets dived more than 7 percent and Japanese indexes fell over 5 percent after Saudi launched an oil price war with Russia.
With the markets in panic mode on Monday, US President Donald Trump is set to meet with his economic team in crafting a further response to reassure investors and businesses. Today, he will give a statement after the meeting to lay out proposed measures.
The dealers rumors, treasury secretary, Steve Mnuchin, was pushing for radical action. US government has reported over 500 cases and 26 deaths over the coronavirus outbreak.
While, the Federal Reserve (Fed) is pumping more cash into the banking system in an effort to meet surging demand for money because of concerns about the coronavirus, which raises concerns about the liquidity crisis.
On Monday, the New York Fed announced it will increase its daily injections of cash into financial markets by US$50 billion to $150 billion as a protective step amid the coronavirus epidemic. The Bank uses the money market to keep the central bank’ policy interest rate in line with the desired range.
The New York Fed said “these adjustments are intended to ensure that the supply of reserves remains ample and to mitigate the risk of money market pressures that could adversely affect policy implementation.”
A number of economists expect the Fed will revisit the tactics it deployed during global financial crisis more than a decade ago as the virus breakout has killed over 3,000 people worldwide and has sent US stocks from all-time peaks earlier this year. These potential measures include lowering short-term rates near zero, buying longer-term Treasuries or quantitative easing and targeted lending to specific sectors.
In Europe, British’ finance minister plans to deliver his annual budget on Wednesday and there is much talk of coordinated stimulus with the Bank of England. In the next day, the European Central Bank has scheduled to meet and will be under intense pressure to act, even though rates there are already deeply negative.
And in Asia, Bank of Japan (BoJ) governor, Haruhiko Kuroda said, the global financial markets were “very unstable” and the economic impact of the coronavirus outbreak could turn out to be big. He Kuroda also told parliament that the central bank had bought a cumulative JPY2.04 trillion (US$19.75 billion) worth of exchange-traded funds (ETF) since October last year.
Under a policy dubbed yield curve control, the BoJ guides short-term interest rates at -0.1 percent and the 10-year government bond yield around zero percent. It also buys risky assets such as ETFs as part of its massive stimulus program.
In addition, Australian Prime Minister, Scott Morrison stated, the governmentqsw would soon announce a package to stimulate an economy hammered by the effects of the coronavirus outbreak, but did not give financial details of the plan.
He rated the impacts from the coronavirus outbreak were “potentially greater” than the global financial crisis of 2008, and the stimulus package would be geared to meet the “unique nature” of the challenge from the virus outbreak.
The Australian government was planning measures worth about A$10 billion ($6.6 billion) to combat the economic impact of the coronavirus, abandoning plans for a budget surplus in the current fiscal year.
The coronavirus has killed about 3,900 people across the globe, with three deaths in Australia. Stock markets have plunged, prompting central banks to ease monetary policies.
– Reuters contributed to this story
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