US indices had a strong recovery today, after posting their worst week since 2008. This comes amid warnings that global growth this year could be the weakest in more than a decade according to the OECD. The organisation lowered it's expectations to 2.4% from 2.9%. Traders are raising the expectations of Central Bank interventions with potential rate cuts that could provide support for equity markets.
SP500 Futures Daily Chart
At the time of writing, the SP500 futures were trading well above the 3000 handle, and earlier during the the day they traded as high as 3092.25. The US ISM Manufacturing PMI for February came in at 50.1 vs the expected 50.5.
Will the recovery continue, or are markets poised for further declines?
The main questions analysts are raising are - how is the spread of the virus going to continue? If we see a peak in new cases, and a slowing down of the spread of the virus - risk assets could see the virus as a temporary event and continue with the recovery.
So far we have seen this occur in China, where we saw that peak, and equity markets have had a recovery.
If however the containment of the virus doesn't occur, and we see Central Bank intervention, we will see whether it will be enough to counter the panic and provide support for risk assets. So far from the reaction today, we can see that traders like the idea of Central Banks being proactive.