Getty/Scott Olson
Global stock markets, oil prices, and bond yields rebounded on Tuesday as investors cheered the prospect of the US government taking action to counteract the economic impacts of coronavirus.
President Donald Trump teased “very substantial relief” during a press conference on Monday. Measures might include support for the hardest-hit industries such as hotels and airlines, a cut to payroll taxes, help for hourly wage earners who could lose hours or miss work due to the epidemic, and loans for small businesses. The White House will discuss several proposals with Congress later today.
However, analysts warned those policies would address symptoms, not the actual problem.
“This is all welcome but is just a plaster on a deep wound unless we see some serious efforts to concurrently fight the virus, not the bear market,” Michael Every, senior Asia-Pacific strategist at RaboResearch, said in a research note.
“Only when that corner is turned can we start to argue for a return to market normality — and we are a long way from that corner being turned globally,” he added.
Coronavirus — which causes a flu-like illness called COVID-19 — has infected more than 114,000 people, killed at least 4,000, and spread to more than 100 countries. Its relentless march spurred Italy to lock down its entire 60 million population on Monday.
Here’s the market roundup as of 12:10 p.m. in London (8:10 a.m. in New York):
- European equities rose, with Germany’s DAX up 2.1%, Britain’s FTSE 100 up 2.9%, and the Euro Stoxx 50 up 2.2%.
- Asian indexes closed higher. China’s Shanghai Composite rose 1.8%, South Korea’s KOSPI rose 0.4%, Japan’s Nikkei rose 0.9%, and Hong Kong’s Hang Seng rose 1.4%.
- US stocks are set to open higher. Futures underlying the Dow Jones Industrial Average, the S&P 500, and the Nasdaq rallied between 3.3% and 3.5%.
- Oil prices rebounded, with West Texas Intermediate up 9.2% at about $34 a barrel and Brent crude up 9.2% at $37.50.
- The 10-year Treasury yield rose to about 0.65%.
“We’re not going to hang our hat on Trump saving the day”
The rally comes after Monday’s brutal market selloff, which was triggered by escalating coronavirus fears and the breakout of an oil-price war.
US stock indexes slumped by more than 7%, oil prices tumbled by about a quarter, and the rush to haven assets meant gold climbed to a seven-year high and the entire US Treasury yield curve slid below 1% for the first time in history.
Some analysts were skeptical the sudden recovery would stick.
“This looks like a short-term bounce on oversold levels, not a meaningful turn,” Neil Wilson, chief market analyst for Markets.com, said in a morning note.
However, investors may be anticipating meaningful government action. Trump frequently touted the record stock market during his presidency, and will be itching to shore it up.
“What has been happening in the market recently may pull the carpet from under his feet during the critical year of the presidential election,” Ipek Ozkardeskaya, senior analyst at Swissquote Bank, said in a morning note.
“It wouldn’t be a surprise to see Donald Trump stepping in with massive fiscal measures to save the year,” she added.
Yet the president’s plans will likely face opposition from Congress.
“Democrats won’t agree to tax cut, especially in an election year,” Jasper Lawler, head of research at London Capital Group, said in a morning note.
“We’re not going to hang our hat on Trump saving the day,” he added.
