In a surprise move the US Federal Reserve slashed US cash rates by 0.5% overnight. It is the first time the Fed has cut between meetings since 2008. Shares rallied at the New York open, but fell away over the session amid concerns that monetary policy is far from the best tool to offset economic damage from the COVID-19 virus.

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.

Futures markets point to a mixed session for Asia Pacific investors. Hong Kong and Australian shares looking at opening falls of around 1%, but Nikkei futures are in modestly positive territory.

Australian GDP data due today is expected to show a 0.4% expansion in the fourth quarter of 2019. Weaker trade data yesterday has some analysts concerned that a negative read is possible, with potential to weigh on local sentiment.