The phenomenal US rescue package agreed late yesterday still has to get approved by Congress but the $2 trillion support which will be provided for both businesses and employees is set to get the green light later today.
US stocks came roaring higher overnight, with the Dow Jones Industrial Average rising 11% and Asian markets uniformly closing higher. The FTSE proceeded to rise from a better opening.
Sports retailer JD Sports, which over the last few days tried and failed to find ways around the government’s decision to close all non-essential shops still bounced 17% Wednesday as investors pinned their expectations on the rescue packages in the US and Britain covering the retailer’s losses.
Banks are also faring better as some of their financial burdens will now be shared with the states and in the ultimate expression of optimism airlines and hotel operators are still trading higher. However, while the generously high rescue packages will go a long way to soften the economic blow of the coronavirus in Europe and the US it will also largely depend on how quickly countries shrug off the pandemic and whether China’s example of two to three months is as viable elsewhere given that other countries have handled the outbreak slightly differently.
Sterling boosted by stock market revival
The uplift in stocks infused sterling trading with some much-needed encouragement and the GBP bounced nearly 1.7% against the dollar. Faced with grim forecasts for the German economy, the euro struggled against the pound. Europe’s largest economy has already been eroded last year by the US-China trade wars and US tariffs on major German imports; the coronavirus could now cause it to shrink by another 20% this year. The main reason why the currency is still holding against the dollar is the expectation that the US has yet to reach the full high of the corona crisis while Germany and other parts of Europe could be close to turning a corner.