The rebound in Australian market came as investors acted on a belief that after RBA's rate cut, other central banks will take some action, including multiple rate cuts, after last week's sell-off fueled anxiety that coronavirus could trigger a recession, even when it wasn't clear that their traditional methods for staving off an economic downturn would be a match for the flu-like virus. The Bank of Japan said it would provide ample liquidity to keep financial markets stable and the Bank of England also pledged to do what's necessary for the British economy's stability. The Federal Reserve next meets on March 18 and market expectations for interest rate cut.
The magnitude of the COVID-19 outbreak and its effect on the economy and supply chains remain the biggest questions for investors. The global death toll from COVID-19 has passed 3,000, and South Korea said Monday it had confirmed 599 new cases, far higher than the daily tally reported in China. Italy now has more than 1,600 confirmed cases, while Iran surpassed 1,500, with 66 deaths. Meanwhile, health officials in Washington state on Monday said there have been four more deaths from the outbreak, bringing the total to six.
The Paris-based Organization for Economic Cooperation and Development on Monday forecast that the global economy would grow by 2.4% in its best case scenario, compared with 2.9% expansion projected before the viral outbreak. The OECD urged governments to act swiftly and forcefully to boost the world economy. Finance ministers from the Group of Seven economies were scheduled to hold a call Tuesday to discuss potential responses to the virus, according to news reports.
The financial sector was in the red, with big banks all lower after the RBA deciding to cut official interest rates to historic lows in March. This would bring the official cash rate to a new historic low of 0.5% after the RBA cut rates three times in 2019. Westpac and the Commonwealth Bank announced they would pass on the rate cut in full. Westpac fell 0.9% to A$22.96. Commonwealth Bank was down 0.7% to A$79.89. ANZ and NAB were both down 0.4%.
ECONOMIC NEWS: The Reserve Bank of Australia has cut interest rates to a record-low level of 0.5% as it looks to nullify the widespread economic damage from the coronavirus outbreak. The 25-basis point rate cut comes a week after the Australian share market bled a staggering $200 billion as investors spooked from Aussie stocks due to virus trade restrictions. Halting global trade and low consumer sentiment now appears to have forced the RBA's hand. RBA Governor Philip Lowe said the decision was made directly in response to the coronavirus threat. "The coronavirus outbreak overseas is having a significant effect on the Australian economy at present, particularly in the education and travel sectors. The uncertainty that it is creating is also likely to affect domestic spending," said Mr Lowe.
CURRENCY: The Australian dollar spiked against greenback, despite the RBA deciding to cut official interest rates to historic lows in March. The Aussie currently buys 65.61 US cents, up 0.3% for the session. It had fallen to 65.10 US cents shortly before the decision was announced.
In Commodity news: Commodities broadly rebounded on Monday from last week's selloffs. Gold futures settled up 1.8% at $1,592.30 an ounce after suffering a nearly 5% decline on Friday, while oil prices with West Texas Intermediate crude for April delivery ended 4.4% higher at $46.75 per barrel.
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