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US moves calm market virus concerns, but for how long?

ANKARA

The U.S. Fed’s moves on aggressive monetary expansion along with Congress’ approval of a $2.2 trillion coronavirus relief bill have soothed the markets, but this upward trend depends on how economies handle the pandemic, said market experts on Thursday.

The bill, considered the largest economic incentive package ever passed by Congress, enables a total of $500 billion to back hard-hurt industries as well as a comparable amount for direct payments of up to $3,000 apiece to millions of U.S. families.

Although the Fed’s moves along with yesterday’s bill were welcomed by world markets, economists still question whether this relief will be only temporary and are still cautious.

Due to coronavirus concerns, the positive trend in the stock markets, other currencies, and gold’s appreciation against the dollar may not be sustainable.

“The stimulus package in the U.S. has taken longer to be agreed on than many had hoped, but this plus the actions of the Fed are undoubtedly positive for market,” Nigel Rendell, director for Europe, the Middle East and Africa at New York-based Medley Global Advisors, told Anadolu Agency.

He said governments and central banks around the world are trying to offset the impact of the coronavirus through a combination of fiscal and monetary measures.

“We saw a big rally in U.S. stocks on Tuesday and today the major equity indices in Asia and Europe are up,” he said, adding that emerging markets, including Turkey, are benefitting from this, with equities stronger and currencies firmer.

The lira has rallied from its recent lows against the dollar, he stressed.

Pointing to fiscal stimulus and monetary easing providing short term support for financial markets, providing some relief for economic activity, he said how markets fare in Turkey and across the globe will ultimately depend on how quickly governments, healthcare systems, and so on can arrest the spread of the virus.

“For now, that is an open question to which there is no answer,” he said.

The Fed and Congress have fired monetary and fiscal policy big guns at financial markets, sending a strong signal of their willingness to backstop the fallout from COVID-19, said Phoenix Kalen, emerging markets strategy director at Paris-based Societe Generale.

“Over the medium term, these moves may modestly alleviate some pressure on emerging markets,” she noted, saying emerging markets assets may still have a long road to recovery.

The Fed on Monday also unveiled a set of aggressive measures to cushion the economic impact of the pandemic, indicating new quantitative easing measures.

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