Stocks rebound further as markets await $2 trillion U.S. stimulus boost

NEW YORK/LONDON (Reuters) – The dollar slid and global equity markets marched higher on Wednesday for a second day of gains, on optimism $2 trillion in U.S. fiscal stimulus will dampen the economic shock the coronavirus pandemic has started to inflict.U.S. senators will vote Wednesday. Top aides to Republican President Donald Trump and senior Republican and Democrat senators agreed on the unprecedented bill after five days of marathon talks.

Hopes that the bill, which amounts to nearly half the $4.7 trillion the U.S. government spends annually, will ease an expected recession lifted world stock indexes .MIWD00000PUS for back-to-back gains for the first time since markets sold off a month ago.

Europe’s main markets in London, Frankfurt and Paris struggled to stay positive after ripping 4%-5% higher. Oil prices swung from 3% up to 3% down. Wall Street also teetered, though the Dow industrials and S&P 500 mostly remained more than 1% higher while the Nasdaq closed lower. [.EU][.T][.N]

The Dow Jones Industrial Average .DJI soared more than 11% on Tuesday in its biggest single-day percentage gain since 1933 and the benchmark S&P 500 jumped 9.4% – its tenth biggest daily gain on record since a daily data series started in 1927.

The stimulus package marks progress but the devil is in the details, said Ron Temple, head of U.S. equity at Lazard Asset Management in New York. The legislation is not available to read to know how it will be executed or when money arrives at households and small businesses gain access to funding, he said.

“This is not the all-clear; it’s just material progress,” Temple said.

“Until we know we can go back to work safely, that we can go to restaurants and go to stores and engage with other humans in close proximity, I don’t think you can make an economic or a market call. It’s premature to be trying to call the bottom.”

The stimulus includes a $500 billion fund to help hard-hit industries and a comparable amount for direct payments of up to $3,000 apiece to millions of U.S. families.

It will also include $350 billion for small-business loans, $250 billion for expanded unemployment aid and at least $100 billion for hospitals and related health systems.

Countries that have locked down their populations to prevent the spread of the coronavirus need to use the time to find and attack the virus, the World Health Organization said.

As the United States works to screen thousands for the coronavirus, a new blood test offers the chance to find out who may have immunity. That could be a game changer in the battle to contain infections and get the economy back on track.

Over 450,000 people have been infected globally and more than 20,000 have died, according to a Reuters tally.

Data on Wednesday pointed to a fast-slowing economy that analysts said signaled the United States already is in recession.

New orders for key U.S.-made capital goods fell sharply in February as demand for machinery and other products slumped, suggesting a deepening contraction in business investment.

The benchmark S&P 500 is still nearly $8 trillion below its mid-February high, and investors expect more sharp swings.

MSCI’s gauge of stocks across the globe .MIWD00000PUS gained 2.88% and emerging market stocks rose 4.40%.

The pan-European STOXX 600 index rose 3.09%.

The Dow Jones Industrial Average .DJI rose 495.64 points, or 2.39%, to 21,200.55. The S&P 500 .SPX gained 28.23 points, or 1.15%, to 2,475.56 and the Nasdaq Composite .IXIC dropped 33.56 points, or 0.45%, to 7,384.30.

In the currency markets, the dollar slipped for a third straight session as a scramble for liquidity was soothed by the super-sized U.S. stimulus plan. [/FRX]

The dollar index =USD fell 0.757%, with the euro EUR= up 0.92% to $1.0886. The Japanese yen JPY= strengthened 0.03% versus the greenback at 111.20 per dollar.

The risk-sensitive Australian dollar AUD=D3 jumped over the 60-U.S. cent mark for the first time in a week.

Bond markets were also calmer. Benchmark U.S. Treasuries were yielding 0.7987% while in Europe Germany’s 10-year yield DE10YT=RR edged a basis point higher to -0.296%, tailed by other higher-rated government debt. NL10YT=RR, AT10YT=RR

European Central Bank chief Christine Lagarde asked euro zone finance ministers during a videoconference on Tuesday to seriously consider a one-off joint debt issue of “coronabonds”, officials told Reuters.

In metals markets, gold changed hands at $1,608.78 an ounce XAU=, retaining most of Tuesday’s gains of almost 5%, its biggest jump since 2008.

U.S. crude prices rose slightly, bolstered by progress on a massive pending U.S. economic stimulus package.

Brent crude LCOc1 gained 24 cents to settle at $27.39 a barrel. U.S. crude CLc1 futures rose 48 cents to settle at $24.49 a barrel.

U.S. gold futures GCcv1 settled 1.5% lower at $1,634.90 an ounce, a day after posting their biggest one-day jump since2009.

GRAPHIC: Global equities post first back-to-back gain during virus sell-off – here

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Stocks, gold surge as Congress nears $2 trillion aid package

NEW YORK/LONDON (Reuters) – Stock markets soared on Tuesday, with a gauge of global equities posting its biggest gain since the coronavirus roiled financial markets a month ago, as the U.S. Congress zoned in on a $2 trillion stimulus package to curb the pandemic’s economic toll.

Senate Majority Leader Mitch McConnell said a deal was “very close” for an aid package that investors hoped would turn around markets reeling from the biggest downturn since the global financial crisis more than a decade ago.

The market rally came a day after the U.S. Federal Reserve’s offer of unlimited bond-buying to help avert a global depression failed to persuade skittish investors, at least initially.

The mood improved on Tuesday, with U.S. gold futures climbing as much as 6.7% to $1,672.60 an ounce and the dollar halting its steady rise as the moves by the Fed and others eased the need for cash and slashed the demand for dollars.

The rally led some to suggest a rout that has trimmed U.S. and European equities by roughly 30% in the past month may be near an end.

“We’re seeing some signs that a bottoming is happening,” said Neel Shah, senior trader at Peak6 Capital Management. “The next big step is the Senate passing the stimulus bill.”

U.S. and European stocks jumped 6% or more and the dollar index, a basket of major trading currencies, slid.

MSCI’s gauge of stocks across the globe gained 8.39%, the largest single-day gain since equities tumbled from all-time highs a month ago and since the height of the global financial crisis in October 2008.

The broad pan-European STOXX 600 index rose 8.40%, its strongest session since late-2008. The index is still down about 30% from a record peak hit in February.

German stocks jumped 11% and British blue chips added 9% as both bourses also posted their best sessionssince 2008.

Europe’s so-called fear gauge fell to 52.53, itslowest in nearly two weeks, after spiking to 12-year highsearlier this month.

Emerging market stocks rose 5.73%.

The rally was wide, lifting most stocks, with only 11 S&P 500 stocks declining on the day.

On Wall Street, the Dow Jones Industrial Average rose 2,112.98 points, or 11.37%, to 20,704.91. The S&P 500 gained 209.93 points, or 9.38%, to 2,447.33 and the Nasdaq Composite added 557.18 points, or 8.12%, to 7,417.86.

(Graphic: Volatility is back on Wall Street, here)

Measures the Fed unveiled on Monday to boost liquidity across debt markets and backstop lending were seen by investors as helping market conditions.

“The Fed’s measures are unprecedented, and they have been extremely proactive in preventing this external shock from morphing into a wider funding crisis,” said Vasileios Gkionakis, head of FX strategy at Lombard Odier.

The Fed also will expand its mandate to buy corporate and municipal bonds and backstop a series of other measures that analysts estimate will deliver more than $4 trillion in loans to non-financial firms.

Other countries unveiled their own measures. South Korea’s ravaged market climbed 8.6% after the government doubled a planned economic rescue package to 100 trillion won ($80 billion).

In China, mainland stocks posted their biggest gain in three weeks of almost 3%, while Japan’s Nikkei soared 7%, its biggest daily gain in four years. [.SS][.T]

Still, investors remained wary, as the number of coronavirus infections globally neared 400,000 and new infections brought in from abroad rose in China.

Business activity collapsed from Australia and Japan to Western Europe at a record pace in March, as measures to contain the outbreak hammered the world economy, and Japan said it was postponing the Olympics.

IHS Markit’s flash composite Purchasing Managers’ Index (PMI) for the euro zone, seen as a good gauge of economic health, plummeted to a record low of 31.4 in March, the biggest one-month fall since the survey began in 1998.

The government and central bank financial support helped calm nerves in bond markets, where yields on two-year U.S. Treasuries hit their lowest since 2013.

The benchmark 10-year U.S. Treasury note fell 31/32 in price to yield 0.8642%.

Germany’s 10-year yield was up 2 basis points on the day at -0.36%, compared with a 4 bps rise before the purchasing managers index (PMI) releases, all small moves when compared to record lows hit at -0.90% earlier in March.

(Graphic: Global financial markets since coronavirus escalated, here)

ALL ABOUT THE ECONOMY

The impact of the virus on the global economy is evident in a series of growth forecast downgrades and advance readings of PMIs across the world’s biggest economies.

German activity plunged to the lowest since the 2009 crisis, driven by a record services contraction, while French activity hit all-time lows. Japan posted its biggest-ever services fall.

However, the prospect of massive Fed funding pushed the greenback 0.26% lower against rivals, off three-year peaks, falling against the yen and sliding 1% versus the euro.

Brent futures rose 12 cents to settle at $27.15 a barrel, while U.S. West Texas Intermediate (WTI) crude rose 65 cents to settle at $24.01.

(Graphic: China’s coronavirus cases, here)

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Markets tumble as scale of stimulus programs numbs investors

NEW YORK (Reuters) – Global equities tumbled anew on Wednesday, with bond and gold prices also falling in an unusual tandem, as markets grappled with the sheer scale of government programs and handouts aimed at softening the economic shockwave from the coronavirus.

The Trump administration asked Congress to approve $500 billion in cash payments to taxpayers in two rounds starting April 6 and $50 billion in secured loans to U.S. airlines to address the outbreak’s impact, according to a document seen by Reuters.

Traders are struggling to sort out the various moves by global central banks and governments to shore up economies bracing for what looms as a short but deep global recession from a pandemic still on the rise.

Investors dumped precious metals and other safe-havens in favor of cash after the additional U.S. stimulus measures announced Tuesday failed to calm markets hit by mounting fears over the economic downside from the coronavirus.

Estimates for the duration of the damage extend out into the summer. Japan already is in a recession, a downturn is imminent in Europe and a U.S. recession will start in the second quarter, a report from IHS Markit said.

The coronavirus has raised the prospect of the steepest ever annual fall in oil demand, Goldman Sachs said. U.S. crude futures plummeted to an 18-year low and Brent hit more than 16-year low as travel and social lockdowns slammed demand.

Certain correlations are breaking down in the markets as typical safe-haven assets sell off, said Yousef Abbasi, global market strategist at INTL FCStone Financial Inc in New York.

“During a dramatic risk-off situation you would expect to see at least a little bit of a bid in bonds or maybe in gold, but we’re seeing the opposite,” Abbasi said.

“Despite the continued pain in equities, the safe-haven asset correlation seems to be now trading with risk assets, rather than the inverse to them,” he said.

Bond prices tumbled, instead of rising, as investors sold to raise cash. Yields on the benchmark 10-year U.S. Treasury yield rose to 1.257%, after earlier hitting 1.226%.

In Europe, the gap between German and other euro zone bond yields widened, with investors demanding higher premiums to hold anything but German debt.

Ten-year French government bonds yielded 69 basis points more than their German counterparts, the most since April 2017.The gap between 10-year German and Dutch debt grew as wide as 37basis points, the most since July 2015.

Gold dropped 2%, falling below $1,500 an ounce.

“Gold continues to suffer from risk-off panics in the market, trading back below $1,500 level,” said Tai Wong, head of base and precious metals derivatives trading at BMO.

“Liquidity here, as in most markets, is deeply compromised and we expect to see continuing volatility, mood-driven swings,” Wong said.

MSCI’s gauge of stocks across the globe shed 6.26% and emerging market stocks lost 5.34%. The pan-European STOXX 600 index lost 3.99%.

On Wall Street, the Dow Jones Industrial Average fell 1,660.63 points, or 7.82%, to 19,576.75. The S&P 500 lost 177.29 points, or 7.01%, to 2,351.9 and the Nasdaq Composite dropped 462.37 points, or 6.3%, to 6,872.41.

Boeing Co fell another -22.1% as the planemaker called for a $60 billion bailout for U.S. aerospace manufacturers facing the fallout of an extended collapse in global travel.

European bourses tumbled, with indexes in London, Frankfurt and Paris plunged from 4% to 5%.

In Asia, the MSCI’s broadest index of Asia-Pacific shares outside Japan dropped 4% to lows last seen in summer 2016, led by a 6.4% fall in Australia. Japan’s Nikkei dipped 1.7%.

The economic slowdown will be tough on travel-related industries, gaming and brick and mortar retail, said Scott Crowe, chief investment strategist at real estate-focused CenterSquare Investment Management in Philadelphia.

U.S. clothing retailer Gap Inc and luxury department store operator Neiman Marcus will close their stores for two weeks, joining other retailers in a vast effort to stem the spread of the coronavirus.

“It’s a little less obvious whether the government will start bailing out retailers. The problem is that a lot of these retailers were already teetering on a knife edge coming into this,” Crowe said. “There are very few industries right now that can sustain to a four- to eight-week shutdown.”

U.S. crude hit its lowest since March 2002, falling even after weekly government data was less bearish than expected. The draw on gasoline stockpiles and smaller-than-expected build in crude inventories showed that people were preparing ahead of business and school closings, analysts said.

U.S. crude fell 18.18% to $22.05 per barrel.

(Graphic: Market selloff speed, severity eclipses previous dislocations, here)

“We are in the midst of the mayhem really, and I think there is still a risk that the increasing number of infections will keep markets on their toes,” said Hans Peterson, global head of asset allocation at SEB investment management.

“It is hard to know how deep the recession will be, and as long as we have that situation it is hard to lift sentiment.”

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Stocks scale fresh peaks on slowing virus, dollar gains

NEW YORK (Reuters) – The dollar gained while several U.S. and European equity indexes scaled fresh peaks on Wednesday after China reported another decline in new coronavirus cases and on expectations of Chinese stimulus to counter a slowdown in growth.

Big manufacturing hubs on the Chinese coast are easing curbs on the movement of people and traffic while local governments prod factories to restart production, a return to economic normalcy sought by investors.

China is widely expected to cut its benchmark lending rate on Thursday, according to a survey of traders and analysts, after the country’s central bank lowered the interest rate on medium-term loans earlier this week.

The death toll from the coronavirus climbed above 2,000, but the number of newly reported cases fell for a second day to the lowest since January. That news lifted Asian shares and spurred U.S. and European stocks to new highs.

“The coronavirus is the top headline these days and the growth in new cases, evidently, has slowed,” said Tim Ghriskey, chief investment strategist at Inverness Counsel.

“Perhaps we’ve seen the worst of it, at least in terms of the growth rate of new cases,” he said, noting there are signs of workers heading back to factories.

IHS Markit said in a research note that it expects the impact on the global economy to be limited, reducing growth by 0.1% in 2020.

The S&P 500 and Nasdaq composite on Wall Street, along with two pan-regional indexes in Europe climbed to new highs, as did Canada’s benchmark index.

MSCI’s gauge of stocks across the globe gained 0.43%, just shy of a record, while its emerging market index rose 0.70%.

The pan-regional STOXX 600 index in Europe rose 0.83% to a new high. Chipmakers hit by Apple Inc’s coronavirus-related revenue warning led a broad rally, with Dialog Semiconductor, STMicroelectronics and AMS AG among the day’s top performers.

The Dow Jones Industrial Average rose 115.84 points, or 0.4%, to 29,348.03. The S&P 500 gained 15.86 points, or 0.47%, to 3,386.15 and the Nasdaq Composite added 84.44 points, or 0.87%, to 9,817.18.

Technology stocks, which are sensitive to news related to China’s growth, gained 1.09%, the most after energy among the 11 S&P sectors.

Overnight, MSCI’s index of Asian shares outside Japan rose 0.5%. Japan’s Nikkei benchmark gained almost 1%, helped by the retreat of the Japanese yen.

Stocks on Wall Street held gains after minutes of the U.S. Federal Reserve’s meeting last month showed policymakers were cautiously optimistic they could hold rates steady this year, even as they acknowledged risks posed by the coronavirus.

The dollar climbed to near a three-year high against a basket of other currencies and the safe-haven yen sank to a nine-month low on the news of an apparent decline in the infection rate for the coronavirus and strong U.S. data.

U.S. homebuilding fell less than expected in January while permits surged to a near 13-year high, pointing to sustained housing market strength that could help keep the longest economic expansion in American history on track.

The dollar index rose 0.15%, with the euro up 0.17% to $1.0809.

The yen weakened 1.23% versus the greenback to 111.26 per dollar.

Crude prices rose more than 2% as demand worries eased with the slowing of coronavirus cases in China and supply curtailed by a U.S. move to cut more Venezuelan crude from the market.

Brent advanced $1.37 to settle at $59.12 a barrel. The global benchmark is up nearly 10% since falling last week to its lowest this year. U.S. oil gained $1.24 to settle at $53.29 a barrel.

U.S. Treasury yields edged higher as expectations China will take more steps to bolster its economy boosted risk taking, and after American economic data beat economists’ expectations.

Edward Park, chief investment officer at Brooks Macdonald, cited President Xi Jinping’s latest commitment to meeting 2020 growth targets.

“This in itself implies there will be more fiscal and monetary stimulus,” Park said. “That’s the real carrot for markets today.”

Benchmark 10-year U.S. Treasury notes last fell 3/32 in price to yield 1.5661%.

Gold rose, holding above $1,600 per ounce, on safe-haven buying from investors seeking a hedge against a bigger economic impact from the coronavirus.

U.S. gold futures settled 0.5% higher at $1,611.80 an ounce.

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