Coronavirus News Asia

Fed measures boost market in holiday-thinned trade

(ATF) Investor sentiment was broadly upbeat in holiday-truncated trade as the US Federal Reserve took additional actions to provide up to $2.3 trillion in loans to support the economy.

But sentiment was dampened as an oil producers’ proposal to cut output by around 10% was seen as insufficient.

In a video conference between OPEC members and other major oil producers it was decided to reduce overall crude oil production by 10 million barrels a day. That will start on May 1, for an initial period of two months.

After, oil prices weakened, with the WTI down 9.3%.

These oil production cuts were decided to offset the slump in demand following the fast-spreading coronavirus pandemic which has infected over 1.6 million people and claimed over 95,000 lives globally.

The US central bank measures included an offer of loans up to $500 million to local governments, $600 million in loans of at least $1 million to firms that have up to 10,000 employees or less than $2.5 billion in revenue, and purchase of recently downgraded junk bonds.

‘Deleveraging pressures’

Christopher Wood of Jefferies & Co said that as for the outstanding private-sector dollar debt, aside from US non-financial corporate-sector debt of $10.1 trillion at the end of last year, other areas of potentially risky US debt are leveraged loans totalling $1.2 trillion and private credit of around $900 billion. This compared with $2.7 trillion in US commercial banks’ commercial and industrial loans.

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