In European Equity Markets the pan-European Stoxx 600 index closed more than 1% higher, having earlier traded up 3% following the U.S. central bank’s decision. Most sectors ended higher, although banks bucked the trend to fall over 1%. Lufthansa led an attempted recovery for embattled airline stocks to jump 9% while British Airways parent IAG gained more than 7%. Hiscox fell 5% after UBS cut its price target, while Italian lender Banco BPM declined 8% as investors reacted negatively to its new business plan unveiled on Tuesday.
In Currency Markets sterling extended gains against the broadly weak dollar on Tuesday after a sudden rate cut by the U.S. Federal Reserve in response to coronavirus damage, while investors bet Britain’s central bank would follow suit. The U.S. Fed stunned markets by cutting interest rates by half a percentage point in an emergency move designed to shield the world’s largest economy from the impact of the coronavirus spread. The pound was up around 0.5% at $1.2811, above a recent 4-1/2 month low of around $1.2726.
In Commodities Markets oil prices rose on Tuesday but remained below session highs reached after the U.S. Federal Reserve cut interest rates in an emergency move designed to shield the world’s largest economy from the impact of the coronavirus. Brent crude was up $1.50 a barrel, or 2.7%, at $53.40, off the session high of $53.90 a barrel hit immediately after the rate cut. U.S. WTI was up $1.49 a barrel, or 3.1%, at $48.23 a barrel, after trading as high as $48.66.
In US Equity Markets stock market indexes inched lower in volatile trading on Tuesday, as investors worried even a shock emergency half-point cut in interest rates might not be enough to shield the world’s largest economy from the impact of the coronavirus epidemic. Bank stocks, which tend to outperform in higher interest rate environment, dropped 2.2% while the broader financials sector fell 1.5%. Nine of the 11 major S&P sectors were trading higher.
In Bond Markets Euro zone government bond yields fell after the U.S. Federal Reserve cut rates in an emergency move on Tuesday, while attention turns to whether the ECB will follow after the bank indicated it stands ready to protect the economy from the coronavirus outbreak. Euro zone bond yields fell following the Fed rate cut and German 10-year government bond yields were down 1 basis point on the day at -0.62%. Italy’s 10-year yield was last down 12 bps to 1.03%, off five-week highs at 1.23% hit during the previous session .