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Stocks up ahead of US growth figures, Fed policy meeting Stocks charge higher on hopes for progress in fighting virus
(about 2 hours later)
BEIJING — Global stocks mostly edged up on Wednesday ahead of U.S. economic growth figures and a Federal Reserve rate decision. Investors seemed buoyed as more governments plan to ease anti-virus controls and allow businesses to reopen. Stocks charged higher around the world Wednesday following an encouraging report on a possible treatment for COVID-19.
Markets in Europe were up slightly, while Shanghai and Hong Kong advanced. Japanese markets were closed for a holiday. Wall Street appeared set for small gains on the open. The optimism helped send the S&P 500 up 1.9% in the first few minutes of trading, and stocks in Europe also jumped after Gilead Sciences said an experimental coronavirus drug met its treatment goal in a major study.
The French and Spanish governments announced plans Tuesday to allow restaurants and other businesses to reopen gradually. They followed Italy, which announced similar plans on Sunday. Gains were widespread across markets, and big tech and communications stocks did some of the heaviest lifting after Google’s parent company said its revenue was stronger than Wall Street was expecting.
“Reopening hopes continue to characterize the market,” Jingyi Pan of IG said in a report. Gilead’s report hit markets at the same moment that a government report showed how pervasive and painful the hit to the economy from the coronavirus outbreak has been. The U.S. economy shrank at a 4.8% annual rate in the first three months of the year, its worst performance since the depths of the financial crisis in 2008.
In midday trading, London’s FTSE advanced 0.9% to 6,008 and the DAX in Frankfurt added 0.3% to 10,830. The CAC 40 in France shed 0.2% to 4,561. The figure was worse than investors were expecting, and it’s “merely the tip of the iceberg,” said Michael Reynolds, investment strategy officer at Glenmede. Job losses have exploded since early April, as layoffs sweep the nation following widespread stay-at-home orders, and economists expect to see even worse numbers for the second quarter of the year.
But stocks have been rallying over the last month as investors look toward the prospect of economies gradually reopening around the world. Some U.S. states and nations around the world have laid out plans to relax restrictions keeping people at home and businesses bereft of customers. A drug treatment for COVID-19, which has killed more than 217,000 worldwide, would help life inch back toward “normal.”
But what got the roughly 30% rally for the S&P 500 started in late March was massive aid from the Federal Reserve and Congress. The Federal Reserve is closing a two-day meeting on interest rates, and most economists expect it to announce in the afternoon that it’s keeping short-term rates at nearly zero. More importantly, investors will be listening for clues about how long the Fed will keep in place its unprecedented efforts to prop up the economy.
The Dow Jones Industrial Average was up 434 points, or 1.8%, at 24,536, as of 10:07 a.m. Eastern time, and the Nasdaq was up 2.5%.
Google’s parent, Alphabet, jumped 7.5% after it reported better revenue for the first three months of the year than Wall Street expected. That helped communications stocks in the S&P 500 rise 4.3%, the biggest gain among the 11 sectors that make up the index. It also raised optimism about digital-advertising trends in Facebook’s earnings report, which is scheduled for after the market closes Wednesday. Facebook rose 5.9%
In Europe, the French CAC 40 rose 1.2%, and the German DAX returned 1.6%. The FTSE 100 in London added 1.9%.
Earnings reports in Europe are mixed, with Volkswagen saying its business is resilient despite a drop in sales but planemaker Airbus warning that the air travel industry’s troubles are just beginning.Earnings reports in Europe are mixed, with Volkswagen saying its business is resilient despite a drop in sales but planemaker Airbus warning that the air travel industry’s troubles are just beginning.
On Wall Street, the future for the benchmark S&P 500 index was 0.6% higher and that for the Dow Jones Industrial Average was up 0.5%. In Asia, Hong Kong’s Hang Seng added 0.3%, and the Kospi in Seoul advanced 0.7%.
Investors will keep an eye on GDP data for the U.S. first quarter, which are expected to show an annual drop of 5% or more. The decline will end the longest economic expansion on record. Many professional investors are skeptical of the U.S. stock market’s big rally. There’s still a lot of uncertainty about how long the recession will last. The vigorous rise for stocks over the last month also implies investors see a relatively quick rebound for the econmoy and profits following the current devastation. But it may take a while for households and businesses to get back to “normal” behaviors.
The Fed is not expected to take any major actions after the end of its two-day meeting Wednesday, having already deployed massive amounts of stimulus to help credit flows and businesses. However there will be interest in its views, with Fed Chairman Jerome Powell holding a news conference. The yield on the 10-year U.S. Treasury fell to 0.58% from 0.61% late Tuesday. Yields tend to fall when investors are downgrading expectations for the economy and inflation.
In Asia, the Shanghai Composite Index closed 0.4% higher at 2,822.44 and Hong Kong’s Hang Seng added 0.3% to 24,643.59. The Kospi in Seoul advanced 0.7% to 1,947.56. Oil prices are continuing their extreme swings after a collapse in demand has sent crude storage tanks close to their limits. Benchmark U.S. oil rose 23.6% to $15.26 per barrel. Brent crude, the international standard, rose 7% to $24.34 per barrel.
The ASX-S&P 200 in Sydney gained 1.5% to 5,393.40 while India’s Sensex added 1.7% to 32,657.03. Singapore and Jakarta gained 0.4% while New Zealand shed 0.9%. ___
Investors who want to know when the deepest global downturn since the 1930s might end have been encouraged by plans to reopen factories, retailing and travel. Economists warn they are too optimistic and say evidence is mounting that the damage is even worse than forecast. AP Business Writer Joe McDonald contributed.
On Wednesday, New Zealand allowed construction sites, restaurants and some other businesses to reopen following a decline in new virus cases.
South Korea’s government reported March industrial production increased by 4.6% compared with the previous month.
“We won’t get too many positive reports on activity in Asia over the coming months, so we should probably make the most of this one,” said Rob Carnell of ING in a report.
In the United States, some governors are rolling back curbs and allowing restaurants, hair salons and other businesses to reopen despite warnings by health experts that moving too fast might lead to new outbreaks.
President Donald Trump, running for re-election amid a slump that has wiped out more than 10 million jobs, is pressing other governors to lift lockdowns. Gov. Andrew Cuomo of New York, one of the hardest-hit and most populous states, says controls will be eased only after numbers of new cases decline.
Elsewhere, Singapore on Tuesday extended its lockdown by four weeks after reporting its highest one-day toll of new cases a day earlier. India also reported a one-day record for new infections on Monday.
Many professional investors are skeptical of the U.S. stock market’s big rally, which has driven the S&P 500 up 28% from its March low. They are wary of how fast stocks have rebounded despite the gradual pace of resuming business activity.
The yield on the 10-year U.S. Treasury fell to 0.58% on Tuesday from 0.65% late Monday. Yields tend to fall when investors are downgrading expectations for the economy and inflation.
In energy markets, benchmark U.S. crude for June delivery gained $2.03 to $14.37 per barrel in electronic trading on the New York Mercantile Exchange. The contract lost 44 cents the previous day to settle at $12.34. Brent crude, used to price international oils, added 89 cents to $23.63 per barrel in London. It rose 47 cents on Tuesday to $20.46.
The dollar declined to 106.50 yen from Tuesday’s 106.86 yen. The euro advanced to $1.0850 from $1.0847.
Copyright 2020 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed without permission.Copyright 2020 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed without permission.