Equities rallied again on Tuesday as investors seized on signs of a slowdown in the spread of the coronavirus in key hotspots and some governments began making plans to ease restrictions aimed at containing the disease, reports BSS/AFP.
Crude prices were also lifted by hopes major producers will agree to cut output this week, while the pound clawed back some of its losses that came in response to news Prime Minister Boris Johnson was in intensive care.
Asia extended Monday’s rally following a surge on Wall Street, with much-needed optimism on news that fresh cases were slowing in Spain, Germany, Italy and France.
And in the US epicentre New York, Governor Andrew Cuomo said that for the first time the growth rate there was flat, while on Tuesday, China — where the disease first emerged late last year — reported no new deaths for the first time since January. Meanwhile, Denmark and Austria have started making plans to lift restrictions slowly as they see light at the end of the tunnel.
“You can’t say that we’ve definitely turned the corner for certain but it does appear as though that is a good sign,” Mark Heppenstall, at Penn Mutual Asset Management, said.
Tokyo and Shanghai stocks were both around two percent higher, while Hong Kong added 1.7 percent, and Seoul and Taipei each jumped 1.8 percent. Mumbai soared six percent, while Singapore piled on more than three percent and Bangkok more than five percent.
Manila and Wellington also gained, though Sydney and Jakarta slipped. In early trade, London jumped three percent, while Paris and Frankfurt were up a little more than three percent.
“Falling infection and death rates from COVID-19 in the worst of the European and US epicentres has inspired markets that the worst of the outbreak is peaking,” said OANDA’s Jeffrey Halley.
“Whether that is, in fact, the case or not… a world hungry for any good news has leapt on board the recovery trade with equities, in particular, outperforming.”
Adding to the positive vibe were further measures to support economies around the world, including a trillion-dollar package in Japan and central bank moves in China. And with the ink barely dry on a $2 trillion rescue plan passed by Congress last month, Donald Trump said he favoured another massive spending programme — again roughly $2 trillion — this time targeting infrastructure projects.
EU leaders are also closing in on a rescue for nations worst hit in the region, according to sources, though not at the level called for by Italy and Spain.
The bloc’s finance ministers will hold a videoconference Tuesday, when they are expected to agree to use the eurozone’s $443-billion bailout fund. However, it is thought they will not act on a proposal to issue “coronabonds” that would pool borrowing among EU nations. While the mood is a little better on trading floors, analysts remained cautious.
“Still, the market will need to come up for air, as for the real economy to recover the pace of play will be dictated more by (governments’) willingness to relax social distancing measures, and the COVID-19 curve would probably need to flatten much more,” said AxiCorp’s Stephen Innes.
– Fresh wave warning –
Rodrigo Catril at National Australia Bank warned there was still a risk of another wave of infections. “An uplift in containment measures is great news but in all likelihood the removal of containment measures will be very slow and the full economic impact remains unknown.”
In a sign of the concern about the toll on the world economy, France’s finance minister said the country was headed for its worst recession since World War II, while German Chancellor Angela Merkel said the virus outbreak was the biggest challenge ever for the European Union.
The gains in equities were matched by an uptick in oil prices, which were also supported by hopes OPEC and other major producers led by Russia will reach a supply deal in talks on Thursday.
Prices fell to 18-year lows last week owing to a price war between Saudi Arabia and Russia, which have ramped up output.
“Prices recovered some of the early losses, as both Russia and Saudi Arabia suggested they would be willing to cut production but only if the rest of the world followed suit,” ANZ Bank said in a note.
“The stumbling block appears to be the US, which is reluctant to join an agreement.”
But with US Energy Secretary Dan Brouillette holding talks with Saudi Arabia and Russia, “the market is hopeful of some sort of agreement”, the bank added.
On currency markets the pound stabilised following Monday’s sell-off as it emerged that Johnson’s condition had worsened after he contracted the virus late last month and was in intensive care.
– Key figures around 0720 GMT –
Tokyo – Nikkei 225: UP 2.0 percent at 18,950.18 (close)
Hong Kong – Hang Seng: UP 1.5 percent at 24,110.58
Shanghai – Composite: UP 2.1 percent at 2,820.76 (close)
London – FTSE 100: UP 3.0 percent at 5,747.20
Brent North Sea crude: UP 2.5 percent at $33.89 per barrel
West Texas Intermediate: UP 2.8 percent at $26.80 per barrel
Euro/dollar: UP at $1.0860 from $1.0794 at 2100 GMT
Dollar/yen: DOWN at 108.85 yen from 109.23 yen
Pound/dollar: UP at $1.2310 from $1.2231
Euro/pound: DOWN at 88.19 pence from 88.21 pence
New York – Dow: UP 7.7 percent at 22,679.99 (close)