Aussie Shares Plunge More than 6%; US Equity Futures Hit ‘Limit Down’

Shares in Australia plunged in early Monday trading and U.S. stock index futures hit “limit down” after the U.S. Federal Reserve slashed its benchmark interest rate to zero and launched a massive quantitative easing program in an emergency move on Sunday.

For the second time in less than two weeks, the Fed shocked investors with a 50 basis point rate cut. Stocks likely plunged because slashing rates just two days before a regularly scheduled policy meeting may be an indication that the economy is in worse shape than previously thought.

At 23:57 GMT, Australia’s S&P/ASX 200 Index is at 5188.20, down 351.10 or -6.34%.

Fed Cuts Rates to Zero; Launches Massive $700 Billion QE Program

In an emergency move Sunday, the Federal Reserve announced it is dropping its benchmark interest rate to zero and launching a new round of quantitative easing.

The QE program will entail $700 billion worth of asset purchases entailing Treasurys and mortgage-backed securities.

The Fed also cut reserve requirements for thousands of banks to zero. In addition, in a global coordinated move by central banks, the Fed said the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Federal Reserve, and the Swiss National Bank took action to enhance dollar liquidity around the world through existing dollar swap arrangements.

Aussie, U.S. Stock Markets Respond Negatively to Fed News

The S&P/ASX 200 was down over 6% shortly after the Fed announcement as all sectors declined, with the heavily weighted financial subindex dropping about 5% as shares of the country’s major banks saw steep declines.

Early in the session, the ASX 200 posted a loss of $100 billion. June one stock among the top 200 gained ground – supermarket giant Coles.

Travel-related companies were sharply lower following the announcement of forced self-isolation for all people entering Australia from overseas.

US Stock Futures Hit Limit Down

The major U.S. stock index futures – S&P 500, Dow and NASDAQ Composite – hit “limit down” levels of 5% lower, a move made by the CME futures exchange to reduce panic in markets. No prices can trade below that threshold, only at higher prices than that down 5% limit.

Traders Anticipating Chinese Industrial Production Data

On the economic data front, Chinese industrial production data for January and February is expected to be out around 02:00 GMT. It is expected to come in at -3.0%, down from 6.9%.

Fixed Asset Investment is expected to come in at -2.0%, down from 5.4% and Retail Sales are expected to have fallen -4.0%, down from 8.0%.