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Global stocks jump on Fed support, easing second wave fears

EconomyJun 16, 2020 02:16AM ET
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© Reuters. A man wearing a protective face mask, following the coronavirus disease (COVID-19) outbreak, is silhouetted in front of a stock quotation board outside a brokerage in Tokyo

By Stanley White and Sumeet Chatterjee

TOKYO/HONG KONG (Reuters) - Asian shares rallied and the dollar fell on Tuesday as risk appetite was bolstered by the formal start of the Federal Reserve's corporate bond buying programme, and earlier worries about a second wave of coronavirus infections eased.

Improving sentiment also pushed up Wall Street futures with e-Minis for the S&P 500 rising 1.6% following a late U.S. stocks rally on Monday. Treasury yields rose and the yield curve steepened.

The Fed said it will start purchasing corporate bonds on Tuesday in the secondary market, one of several emergency facilities launched in the wake of the coronavirus pandemic.

A flood of liquidity in the form of fiscal and economic stimulus, along with uneven but steady re-openings of state and local economies, sparked a sharp rally in the stock market since its late-March trough.

"Equities were overbought and corrected lower, but the S&P 500 has bounced off support because of the Fed," said Shane Oliver, head of investment strategy and chief economist at AMP (OTC:AMLTF) Capital Investors in Sydney.

"The markets will continue to go higher as long as economies continue to reopen and as long as the number of coronavirus cases is not large enough to stop the reopening."

The investor sentiment was also boosted by a Bloomberg News report that the Trump administration is preparing a nearly $1 trillion infrastructure proposal as part of its push to spur the world's largest economy back to life.

MSCI's broadest index of Asia-Pacific shares outside Japan rose 3.2%, its biggest one-day gain since March 25. Australian stocks rose 4.4%, while shares in China rose 1.2%.

European markets were also set for a strong opening with pan-region EuroSTOXX 50 futures rising nearly 3.0%, German DAX futures gaining 3.1% and FTSE futures trading up 2.6% by 0534 GMT.

Sentiment in Asia was also helped by data showing there were 27 new coronavirus cases in Beijing, down from 36 new cases the previous day. Beijing banned high-risk people from leaving the capital to stop the spread of a fresh outbreak.

Japan's Nikkei stock index closed up 4.9%, its biggest daily gain since March 25, while shares in South Korea were up 4.8%.

But some analysts were not convinced about the strength of the gaining momentum.

"With pricing across the risk spectrum now rich, we expect further gains to be more selective, differentiated and volatile...on fears of a COVID-19 second wave and concerns about their extended valuations," Barclays (LON:BARC) analysts wrote in a research note on Tuesday.

Against a basket of currencies the dollar eased 0.1% to 96.44, almost 1% below Monday's high of 97.396. The risk-sensitive Australian dollar sits more than 2% above a two-week low hit on Monday, and rose 0.6% to $0.6968 on Tuesday.

The yen was little changed at 107.33 per dollar. The Bank of Japan kept monetary settings steady on Tuesday and stuck to its view that the economy will gradually recover from the coronavirus pandemic.

The Fed on Monday also announced eagerly-awaited details of its programme to lend funds directly to companies.

Benchmark 10-year Treasury yields notes edged up to 0.7363%, while the spread between two-year and 10-year yields widened to 54 basis points in a sign of improving risk appetite.

Oil prices were steady on Tuesday as lingering concerns over the threat to fuel demand from the resurgence of new coronavirus infections around the world were cushioned by hopes for further cuts in crude supplies. [O/R]

U.S. crude was trading up 0.2% at $37.18 a barrel, after having fallen 1.2% earlier, while Brent crude also rose 0.2% to $39.78 per barrel.

Global stocks jump on Fed support, easing second wave fears
 

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Comments (21)
Hayrettin Cetinturk
Hayrettin Cetinturk Jun 16, 2020 5:40AM ET
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no.matter what fed does. recession or depression will install
Hayrettin Cetinturk
Hayrettin Cetinturk Jun 16, 2020 5:39AM ET
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bankrupcies will.follow. its time to.sell. i am.short on global indicrs
Secret Top
Secret Top Jun 16, 2020 5:31AM ET
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No matter what people say, I fully trust what US government is doing. And support them 100%.
Gelik Brabus
Gelik Brabus Jun 16, 2020 5:31AM ET
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LOL
ROBERT MARTINEZ
ROBERT MARTINEZ Jun 16, 2020 3:24AM ET
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WHAT SECOND wave? aren't we still on the FIRST! LOL
Hunt Richardson
Hunt Richardson Jun 16, 2020 2:36AM ET
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why didn't Congress agree to trillions of dollars investment in infrastructure before this all happened? everyone knows US needs it
Long Tran
Long Tran Jun 16, 2020 2:22AM ET
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Until the FED runs out of bullets.
Janne Luoto
Janne Luoto Jun 16, 2020 2:08AM ET
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go uncle Fed go!
anony mous
anony mous Jun 16, 2020 1:48AM ET
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Fed may be posing the end of US economic leadership... why don’t we learn from Japan?
Steel Inquisitor
Steel Inquisitor Jun 16, 2020 1:48AM ET
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In the land of the blind, even a one-eyed woman can be queen
James Marshall
James Marshall Jun 16, 2020 12:05AM ET
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enjoy the FED bubble. however, understand the consequences coming down the pipeline. remember not a single politician question this infinite monetary policy. deflation followed by inflation and the largest decline in human history. Look at any chart with an asset in a bubble. we all know what happens after. Powell should be in jail and should have gone in 2018, 2019, and now. time is the teller of truth. be ready. in the meantime enjoy the bub.
James Marshall
James Marshall Jun 16, 2020 12:05AM ET
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prison not jail
Sophie Zhao
Sophie Zhao Jun 16, 2020 12:05AM ET
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Skinny Moose economy 101 has taught us. During recession, government increases spending. They can purchase more stuff, build inferstructure, even give out food and grocery coupon to ordinary household. It’s so ridiculous to see fed cares so much about and manipulate the stock market.
Michael Angelo
Michael Angelo Jun 15, 2020 11:48PM ET
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The interesting thing for all this economic wizard apprentices (cheer man Powell and Bubble Donald) is how the market goez back to normality because this is worst than Socialism, Communisme or dictatorship. To everybody, we won't have a valuation to trust and second hire many centuries will need Fed to untangle this massive bond accumulation. Think whatever but here is were China comes and take over, when I always have been thinking what will be the opportunity. Kabum...
perplexed76 .
perplexed76 . Jun 15, 2020 11:30PM ET
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Bernanke is a miser in comparison with powell guy.
dog log
dog log Jun 15, 2020 11:05PM ET
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like if you think its a good week to invest then pull out on friday, dislike if you think its not.
Victor Sierra
Victor Sierra Jun 15, 2020 11:05PM ET
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Skinny Moose yeah, but if you can make over $1,000 within a week thats not bad so....
dog log
dog log Jun 15, 2020 11:05PM ET
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Skinny Moose  `haahaha nice one
Randall Wagner
Randall Wagner Jun 15, 2020 11:02PM ET
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Fed just created a bridge over moat that the government dug. Repairs are justified and due. We all expected it as they have been saying this for 3 months. They need fix what they broke for your health.
Shandy Gehlot
Shandy Gehlot Jun 15, 2020 11:01PM ET
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trump buy 3 days before lotoff company stock in lower price now stock market up ..
Diego Quintas
Diego Quintas Jun 15, 2020 11:01PM ET
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how do you know that??
Sean Mastro
Sean Mastro Jun 15, 2020 11:01PM ET
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Guess the person doesnt care enough tp respond.
Midway Eholdings
Midway Eholdings Jun 15, 2020 10:49PM ET
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Pedo Joe is always thinking about the children
Thom Miller
Thom Miller Jun 15, 2020 10:36PM ET
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Kinda like Socialism, don’t ya think? At least Dr Donny can’t use that against the Dems now....
Boondock Saint
Boondock Saint Jun 15, 2020 10:36PM ET
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When government forces businesses to shut down, they have a duty to remedy the destruction they caused
Kevin Wilkie
Kevin Wilkie Jun 15, 2020 10:26PM ET
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The Fed IS the market.
Brandon Son
Brandon Son Jun 15, 2020 10:06PM ET
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criminal
John Casablancas
John Casablancas Jun 15, 2020 9:43PM ET
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FED is creating appropriate conditions to increase investing and improve economy. it make sense market is going up. The economy will do well and market is anticipating that.
Robert Cox
Robert Cox Jun 15, 2020 9:43PM ET
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I can't tell if you believe this or were just trying to provoke a response. The Fed's only job is to ensure liquidity. It is not now, nor has it ever been, to ensure solvency. All this program is designed to do is bail out corporations without making it obvious that you are bailing out corporations. If that debt turns bad, the US taxpayers will be the ones to take the hit.
william robert
william robert Jun 15, 2020 9:43PM ET
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Robert Cox  https://wallstreetonparade.com/2020/05/fed-chair-powell-has-upwards-of-11-6-million-invested-with-blackrock-the-firm-that-will-manage-a-750-billion-corporate-bond-bailout-program-for-the-fed/
Kapil Baldawa
Kapil Baldawa Jun 15, 2020 9:28PM ET
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I guess someone like George Soros is preparing for a bigger single pay day by shorting USD n US Fed will make it easier for it. Japan first, now US.. I guess China is loving it the most.. USD getting thrashed is beginning of the end of US dominance and clout and is being led by a Fed Chair n Prez, who hardly knows what Finance n economics are
Ed Kutch
Ed Kutch Jun 15, 2020 9:28PM ET
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never happen...
Olivier Ve
lamborghinibull Jun 15, 2020 9:23PM ET
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yeah yeah economy opens market gonna crash second lockdown stocks to the moon.True bankster plandemic.
 
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