March 25, 2020 / 12:50 AM / 14 days ago

Stocks rebound further as markets await $2 trillion U.S. stimulus boost

NEW YORK/LONDON (Reuters) - The dollar and global equity markets marched higher on Wednesday and were poised for a second day of gains following a coronavirus-induced selloff, though investors remained concerned about the pandemic’s economic impact.

Hopes that an incoming $2 trillion U.S. fiscal stimulus will ease the economic devastation caused by virus lockdowns lifted world equity indexes .MIWD00000PUS for a second day after historic gains on Tuesday, but investors refrained from calling a bottom.

Europe’s main markets in London, Frankfurt and Paris were struggling to stay positive after ripping 4%-5% higher and oil prices swung from 3% up to 3% down. Wall Street also teetered though it mostly remained more than 1% higher.

The Dow Jones Industrial Average .DJI soared more than 11% on Tuesday in its biggest single-day percentage gain since 1933 and the benchmark S&P 500 jumped 9.4% - its tenth best day on record out of 24,067 trading sessions since a daily data series started in 1927.

The stimulus package marks progress but the devil’s in the details, said Ron Temple, head of U.S. equity at Lazard Asset Management in New York. The legislation is not available to read to know how it will be executed or when money arrives at households and small businesses gain access to funding, he said.

“This is not the all-clear, it’s just material progress,” Temple said.

“Until we know we can go back to work safely, that we can go to restaurants and go to stores and engage with other humans in close proximity, I don’t think you can make an economic or a market call. It’s premature to be trying to call the bottom.”

The stimulus includes a $500 billion fund to help hard-hit industries and a comparable amount for direct payments of up to $3,000 apiece to millions of U.S. families.

It will also include $350 billion for small-business loans, $250 billion for expanded unemployment aid and at least $100 billion for hospitals and related health systems.

U.S. senators will vote Wednesday. Top aides to Republican President Donald Trump and senior Republican and Democrat senators agreed on the unprecedented bill, which amounts to nearly half the $4.7 trillion the U.S. government spends annually, after five days of marathon talks.

Data pointed to a fast-slowing economy that analysts said signaled the United States already was in recession.

FILE PHOTO: The floor of the New York Stock Exchange (NYSE) stands empty as the building prepares to close indefinitely due to the coronavirus disease (COVID-19) outbreak in New York, U.S., March 20, 2020. REUTERS/Lucas Jackson

New orders for key U.S.-made capital goods fell sharply in February as demand for machinery and other products slumped, suggesting a deepening contraction in business investment.

The benchmark S&P 500 is still nearly $8 trillion below its mid-February high, and investors expect more sharp swings. Wall Street’s fear gauge eased overnight but was on the rise again ahead of Wednesday’s open.

MSCI’s gauge of stocks across the globe .MIWD00000PUS surged 2.65% and emerging market stocks rose 4.32%.

The pan-European STOXX 600 index rose 0.96%.

The Dow Jones Industrial Average .DJI rose 661.9 points, or 3.2%, to 21,366.81. The S&P 500 .SPX gained 35.76 points, or 1.46%, to 2,483.09 and the Nasdaq Composite .IXIC added 34.47 points, or 0.46%, to 7,452.33.

In the currency markets, the dollar slipped for a third straight session as a scramble for liquidity was soothed by the super-sized U.S. stimulus plan, though it was starting to look a little stronger again.

The dollar index =USD fell 0.216%, with the euro EUR= up 0.44% to $1.0834. The Japanese yen JPY= weakened 0.24% versus the greenback at 111.51 per dollar.

The risk-sensitive Australian dollar AUD=D3 jumped over the 60-U.S. cent mark for the first time in a week.

Bond markets were also calmer. Benchmark U.S. Treasuries were yielding 0.7987% while in Europe Germany’s 10-year yield DE10YT=RR edged a basis point higher to -0.296%, tailed by other higher-rated government debt. NL10YT=RR, AT10YT=RR

European Central Bank chief Christine Lagarde asked euro zone finance ministers during a videoconference on Tuesday to seriously consider a one-off joint debt issue of “coronabonds”, officials told Reuters.

In metals markets, gold changed hands at $1,608.78 an ounce XAU=, retaining most of Tuesday’s gains of almost 5%, its biggest jump since 2008.

FILE PHOTO: People wearing protective face masks, following an outbreak of the coronavirus disease (COVID-19), look at a stock quotation board outside a brokerage in Tokyo, Japan, March 10, 2020. REUTERS/Stoyan Nenov

Oil prices fell despite the massive pending U.S. economic stimulus package as the coronavirus pandemic hurt U.S. fuel demand, with traders bracing for further declines.

Brent crude LCOc1 was down 17 cents, or 0.6%, to $26.98 a barrel. U.S. crude CLc1 futures fell 21 cents, or 0.9%, to $23.80 a barrel.

Reporting by Herbert Lash; Editing by Bernadette Baum

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