- Stocks, oil and bitcoin recovered on Tuesday as investors welcomed the Federal Reserve's extensive stimulus measures.
- The central bank promised to buy government bonds and other assets "as needed" and to introduce credit facilities for consumers, businesses and cities.
- "The risk is that these policies are as addictive as opioids and that the cure turns out to be worse than the disease," warned an analyst.
- The failure of the Senate to agree on an economic stimulus package for a second day depressed market sentiment.
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Stocks, oil and bitcoin recovered on Tuesday after the Federal Reserve launched a series of sweeping measures to support the U.S. economy against the novel corona virus. Investor enthusiasm, however, was tempered by the Senate's failure to push ahead with an important stimulus package for a second day on Monday.
The central bank committed to purchase Government bonds and mortgage-backed securities "in the amounts required" to support the markets and underpin their monetary policy. Three new credit facilities have been introduced to provide new funding of $ 300 billion to large employers, consumers and businesses. In addition, two credit facilities have been expanded to make it easier for cities to access credit, and the intention is to set up another credit program to support small and medium-sized enterprises.
"The Fed has withdrawn the heavy artillery," said Ipek Ozkardeskaya, senior analyst at Swissquote, in a morning note.
Senate Democrats, however continue to block The Republican aid package pushed for more transparency about which companies received the funding and restrictions on how they could be used. They also pushed for unemployed people, hospitals and others to get more money.
The corona virus, which causes a flu-like disease called COVID-19, has infected more than 378,000 people, killed at least 16,500 people, and spread to over 160 countries and areas. It has slowed global economic growth by disrupting supply chains, forcing companies to cut or close their populations, and causing governments to close their populations to reduce transmission.
Analysts warned that markets could become dependent on easy money after the Fed's recent measures.
"The Fed now offers backstops for pretty much everything except President Trump's popular Dow Jones index," said Bas van Geffen, quantitative analyst at RaboResearch, in a research note.
"The risk is that these policies are as addictive as opioids and that the cure is worse than the disease," he added.
Here is the market summary from 10:45 a.m. in London (6:45 a.m. in New York):
- European stocks recovered with those of Germany DAX plus 6.3%, Great Britain FTSE 100 by 4% and the Euro Stoxx 50 plus 5.9%.
- The Asian indices rose with those of China Shanghai Composite plus 2.3%, Japan's Nikkei by 7%, Hong Kong Hang Seng plus 4.4% and South Korea KOSPI plus 8.6%.
- US stocks are facing a positive opening. The underlying futures Dow Jones industry average, the S&P 500, and the Nasdaq rose between 5% and 5.4%.
- Oil prices recovered with West Texas Intermediate up 6.7% at $ 24.90 a barrel and Brent Crude Oil Up 4.9% to $ 28.30.
- The benchmark 10 years of treasury The yield rose to 0.83%.
- gold jumped 5.2% to $ 1,648.
- Bitcoin rose approximately 15% north of $ 6,700.