Wall Street stocks bounced in opening trade today, recovering some of the losses from yesterday’s rout, in anticipation of stimulus measures to address the economic hit from coronavirus.
About 15 minutes into trading, the Dow Jones had gained 2.7% after losing more than 2,000 points yesterday in its worst session since 2008. Meanwhile, the broad-based S&P 500 surged 2.5%, while the tech-rich Nasdaq Composite Index advanced 2.6%.
After bouncing back in earlier trade following yesterday’s mauling, European markets had pared most of their earlier gains this afternoon.
London’s FTSE index was up 0.2% by 3pm, while the Paris CAC dipped 0.3% and the Frankfurt DAX was flat.
Dublin’s ISEQ index also pared back its earlier gains to stand 0.2% higher with shares in Bank of Ireland up 5.3% and AIB gaining 1.9%.
Asian stocks had also bounced today on hopes that global policymakers would introduce co-ordinated stimulus to cushion the economic impact of a coronavirus outbreak.
Oil similarly clawed back some of its massive losses from yesterday, rallying 7% and offering hope that markets had found a floor, although sentiment was still fragile a day after prices plunged.
Supporting the mood was a pledge from President Donald Trump to take “major” steps to protect the economy and float the idea of a payroll tax cut with congressional Republicans.
The gains in the US and European futures come on the back of a 1.36% rise in MSCI’s broadest index of Asia-Pacific shares outside Japan, having dropped more than 5% on Monday.
But despite the bounce, analysts warned it was too early to call a trough in equity markets.
Japan’s Nikkei index ended the day up 0.85%, after touching its lowest level since April 2017 earlier in the day.
The Australian market closed up 3.1% as some went hunting for bargains in beaten down stocks.
China’s benchmark Shanghai Composite Index was trading up 1.7% as new domestic coronavirus cases tumbled and President Xi Jinping’s visit to the epicentre of the epidemic lifted sentiment. Shares in Hong Kong closed 1.4% higher.
Headlines on the coronavirus, however, were still no brighter with Italy ordering everyone across the country not to move around other than for work and emergencies, while banning all public gatherings.
“Although uncertainty is very high, we now expect similar restrictions will be put in place across Europe in the coming weeks,” warned economists at JPMorgan.
Such has been the conflagration of market wealth that analysts assumed policy makers would have to react aggressively to prevent a self-fulfilling economic crisis.
The US Federal Reserve yesterday sharply stepped up the size of its fund injections into markets to head off stress.
Having delivered an emergency rate cut only last week, investors are fully pricing an easing of at least 75 basis points at the next Fed meeting on March 18, while a cut to near zero was now seen as likely by April.
Britain’s finance minister is due to deliver his annual budget tomorrow and there is much talk of coordinated stimulus with the Bank of England.
The European Central Bank meets on Thursday and will be under intense pressure to act, even though rates there are already deeply negative.
“Italy’s decision to quarantine the whole country will affect 15% of Europe’s GDP, putting thee ECB at the forefront of efforts to cushion the escalating economic deterioration,” said Brian Martin, a senior international economist at ANZ.
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