NEW YORK / LONDON – Financial markets rebounded strongly on Tuesday, with a measure of global stocks heading for the biggest recovery since the crisis broke out a month ago, while the safe haven dollar retreated as investors welcomed unprecedented global economic moves .
While the Fed’s bid to buy unlimited bonds should not mitigate the devastating effects of the corona virus alone, investors hoped that other bailout packages would help avert global depression.
The Fed’s moves failed to convince Wall Street on Monday, with losses of 2 to 3 percent on key indices. But sentiment improved on Tuesday as other governments and central banks stepped in and Congress prepared a $ 2 trillion stimulus package to limit the economic impact of the rapidly expanding pandemic.
US gold futures rose 6.7 percent to $ 1,672.60 an ounce as the movements of the Fed and other companies reduced the need for cash and reduced demand for the dollar.
“The Fed’s actions are unprecedented and have been extremely proactive in preventing this external shock from turning into a broader financial crisis,” said Vasileios Gkionakis, head of foreign exchange strategy at Lombard Odier.
US and European stocks rose 6 percent or more, and the dollar index, a basket of major trading currencies, slipped.
MSCI’s global stock index rose 6.88 percent. This is the biggest gain in a day since stocks fell from an all-time high a month ago.
The broad pan-European STOXX 600 index rose 6.41 percent and emerging market stocks rose 5.97 percent.
The Dow Jones Industrial Average rose 1,538.36 points, or 8.27 percent, to 20,130.29. The S&P 500 rose 164.01 points, or 7.33 percent, to 2,401.41, and the Nasdaq Composite rose 453.25 points, or 6.61 percent, to 7,313.93. The TSX in Canada rose 945 points to 12,173.
The Fed will also extend its mandate to corporate and local government bonds and stop a number of other measures that analysts estimate will lend more than $ 4 trillion to non-financial corporations.
Other countries have presented their own measures. South Korea’s devastated market grew 8.6 percent after the government doubled a planned economic bailout to 100 trillion won ($ 80 billion).
In China, mainland stocks posted the largest increase in three weeks, at almost 3 percent, while the Japanese Nikkei gained 7 percent, the largest daily gain in four years.
However, investors remained cautious as the number of coronavirus infections exceeded 350,000 and new infections from abroad increased in China.
IHS Markit’s Flash Composite Purchasing Managers’ Index (PMI) for the eurozone, which is considered a good measure of economic health, fell to a record low of 31.4 in March, the largest drop since the survey began in 1998.
Joe Saluzzi, co-manager for trading at Themis Trading in Chatham, New Jersey, said it was too early to end the economic downturn as the pandemic was not resolved and lacked insight into the depth of the economic downturn have received.
“The answer is still,” You have to get it under control, “Saluzzi said of the coronavirus.” Everyone keeps saying that it will get worse before it gets better, so the markets will remain restless and volatile. “
Financial support from the government and the central bank helped calm nerves in bond markets, where yields on two-year US government bonds reached their lowest level since 2013.
The benchmark’s 10-year US Treasury note fell 32/32 and returned 0.8674 percent.
Germany’s 10-year yield rose 2 basis points a day to -0.36 percent, compared to an increase of 4 basis points before the publication of the Purchasing Managers’ Index (PMI). These were all small moves compared to record lows that were previously at -0.90 percent in March.
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German activity fell to its lowest level since the 2009 crisis, reflecting a decline in record services, while French activity fell to an all-time low. Japan saw the largest decline in services so far.
However, the prospect of massive Fed funding depressed the greenback from rivals by 0.26 percent from three-year highs, fell against the yen and fell 1 percent against the euro.
© Thomson Reuters 2020