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The drop in the Australian share market despite the US Fed rate cut raises questions over the ability of central banks to halt the fall in share prices, according to Michael McCarthy of CMC Markets in Sydney. The moves in Australia follow late falls on Wall Street as the main indices failed to rally on the emergency Fed stimulus.
The market reaction to the Fed’s decisive action is worrying for investors. Major US indices dropped 2.5% to 3%. There is now a question over the ability of monetary policy to halt plummeting asset prices. The dangers of negative wealth effects from stock market falls adds to concern about the global outlook. The seeming ineffectiveness of further monetary easing will almost certainly lead to further calls on governments to push the fiscal stimulus button.
Bonds rallied again, pushing yields to fresh all-time lows. Gold found a firmer footing to rally by 3% as the US dollar slipped. In an illustration of the unusual conditions cryptocurrencies were among the least volatile markets.
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