Markets poised for ‘totally wild’ trading
Investors are wincing ahead of a "totally wild" trading week as increasingly tight travel restrictions in response to the spread of coronavirus shuts down major economies and cripples supply chains.
Despite the gloomy conditions, the local futures index suggests the ASX could rise more than 1 per cent at the open following a massive rise in shares on Wall Street through to Saturday morning Australia time.
But analysts say global stocks will continue to be at the mercy of the deadly disease as case numbers rise and Prime Minister Scott Morrison announced all international travellers would be forced to self-isolate from this morning.
"The situation in global markets currently is totally wild," IG market analyst Kyle Rodda said in a note this morning.
"The core issue is the coronavirus, of course. But at the stage the crisis is in now, for the markets, everything centres on which place in the world is grinding to an economic halt, and what emergency measures policymakers are taking to support economies through the tumult.
"Signs of stress on the financial system remain as conspicuous as they've been since the GFC. And by extension, volatility remains very high."
Mr Rodda said the increased volatility would lead to erratic movements both higher and lower, as illustrated in Friday's session.
Traders were left speechless when the ASX closed more than 4 per cent higher on the last day of the week after slumping as low as 8 per cent during the day - a swing of more than 12 per cent.
"From a fundamental economic point of view, the top concern right now is a US recession," Mr Rodda said.
"The markets seemed to welcome the Trump administration's new package to combat that risk.
"It declared the coronavirus outbreak a national emergency and promised a range of measures, including freezing interest on student debt and providing free coronavirus tests," he said.
The market has now lost $529 billion since its all-time high reached just three weeks ago on February 20.
Both the United States and New Zealand central banks aggressively cut interest rates to zero and 0.25 per cent as part of a global trend to prepare for the financial crisis spurred by the pandemic.
The Aussie dollar is swinging in a 2 per cent range based on the levers being pulled by policymakers across the planet.
It weakened when the RBNZ cut its rates and strengthened when the Federal Reserve did the same. At 8.00am Sydney time, the Australian dollar was buying 61.44 US cents from 62.98 when the market closed on Friday.
- with AAP