Global stocks rise despite Feds Powell warning that the coronavirus downturn could last until late 2021

Reuters

• Global stocks climbed on Monday as investors brushed off Federal Reserve chairman Jerome Powell’s warning that the coronavirus-fueled economic downturn could last until the end of next year.
• US oil prices jumped more than 5% to a 2-month high, passing $30 a barrel for the first time since prices turned negative in late April.
• Gold rose about 1% to its highest level in more than seven years.
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Global stocks climbed on Monday as investors brushed off Federal Reserve Chair Jerome Powell’s warning that the coronavirus downturn may linger until late 2021.

In a “60 Minutes” interview on Sunday, Powell said that Americans should prepare for a prolonged US recovery as it would “take a while for us to get back.” However, he remained optimistic about an economic rebound if there isn’t a second wave of infections.

Powell acknowledged that the unemployment rate could soar as high as 25%, but expressed confidence that government policies will be able to keep families solvent. “There’s a lot more we can do…we’re not out of ammunition by a long shot,” he said.

The comments reassured investors that the central bank can handle further economic fallout, analysts said.

“This went some way to reversing the losses Powell provoked last week, when the Fed chair appeared to take negative interest rates off the table,” Connor Campbell, a financial analyst at SpreadEx, said in a morning note.

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Market sentiment likely benefited from easing of lockdowns in several countries and signs of a slowdown in the number of new coronavirus cases.

It may also have been buoyed by the House of Representatives passing a second $3 trillion relief bill last week. However, the legislation may not be approved by the Republican-controlled Senate.

Meanwhile, the prospect of further government support boosted stocks across the pond on Monday.

“Giddy at the thought of some more monetary juice being pumped into the markets, European investors woke up with a spring in their step,” Campbell said.

Japan’s Nikkei index also rose 0.5%, despite the release of official data on Monday showing the world’s third-largest economy tumbled into its first recession since 2015.

The nation’s gross domestic product fell by 0.9% in the first three months of the year, after dropping 1.9% in the fourth quarter of 2019 – before lockdowns and restrictions were even implemented. Exports also fell the most since the crippling March 2011 earthquake.

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Here’s the market roundup as of 11:25 a.m. in London (6:25 a.m. ET):

• European equities rose, with Germany’s DAX up 2.7%, Britain’s FTSE 100 up 2.1%, and the Euro Stoxx 50 up 2.1%.
• Asian indexes climbed with China’s Shanghai Composite up 0.2%, Hong Kong’s Hang Seng up 0.6%, and Japan’s Nikkei up 0.5%.
• US stocks are set to open higher. Futures underlying the Dow Jones Industrial Average, the S&P 500, and the Nasdaq rose between 1.2% and 1.5%.
• Oil prices jumped, with West Texas Intermediate up 7% at $31.60, and Brent crude up 5.6% at $34.30.
• The benchmark 10-year Treasury yield rose to 0.64%.
• Gold rose 0.9% to $1,772, its highest level in more than seven years.

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