US stocks have staged a recovery following their worst day since the 2008 financial crisis, while the FTSE 100 again found itself in negative territory.
Monday had seen a crash in values globally, blamed on a surge in COVID-19 cases and Saudi threats of an oil price war, which combined to send investors running for the hills.
It culminated in the fifth-biggest one day fall in the FTSE’s history while trading in US shares was suspended after declines triggered so-called circuit breakers, designed to help limit intense volatility.
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But sentiment turned overnight on growing hopes of government-led stimulus globally to support businesses and consumers through COVID-19 disruption.
Donald Trump, who has hailed recent record stock market values as a triumph of his presidency ahead of November’s election, announced “major” steps to guard the US economy against the impact of the coronavirus outbreak.
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In the US, the S&P 500 and Nasdaq both enjoyed their biggest percentage gains since December 2018.
The Dow Jones finished up 4.89%, the S&P 500 was up 2.8% and the Nasdaq rose by 4.69%. Among the winners were airlines and cruise ship stocks, previously battered by a fall in demand for travel since the coronavirus outbreak.
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American Airlines jumped 15.3% and Delta Air Lines rose 4.5%. Royal Caribbean Cruises climbed 7% and Carnival rose 10.5%.
The gains reflect hopes that government and limited central bank aid will have a real effect on limiting damage to the global economy in the months to come as the coronavirus crisis deepens.
The market shrugged off a big cut in interest rates by the US Federal Reserve a week ago, as it failed to ease the potential for a crisis of supply ahead amid warnings of a possible global recession.
Following limited gains in Asia, the FTSE in London rose by just over 1.2% at the open but closed down 0.9%
Its early surge was partly aided by a recovery in Brent crude oil, which was trading at just under $37 a barrel following Monday’s price collapse.
Gains fluctuated when Saudi Arabia confirmed plans to raise production by 2.6 million barrels per day in April, to record levels, following Russia’s refusal to help stabilise prices through output cuts.
Energy, travel, and mining stocks were seeing the greatest relief in London, with TUI, easyJet and Shell leading the way.
The MIB in Italy – a country under lockdown to fight the spread of COVID-19 – closed down 3.2% after a fall of 11% on Monday.
In the UK, the Bank of England has been working in coordination with the Treasury on how businesses can be supported ahead of possible supply chain disruption.
Among companies reporting their progress to the City on Tuesday, the furniture retailer DFS said it had just started to see an impact on customer numbers.
It refused to give guidance on expectations for the 12 months to June as the outbreak evolves but said it would expect weaker sales volumes in the short term to catch up later in the year.
Safestay, the hostel operator, warned of a “material reduction” in new bookings and cancellations.
The budget on Wednesday is expected to be used to announce support for UK firms – as chancellor Rishi Sunak pledges to give the NHS what it needs to deliver the best possible care.
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Commenting on the market moves, Ipek Ozkardeskaya, senior analyst at Swissquote Bank, said: “US equity futures rallied as US President Donald Trump announced that the White House and Congress will meet on Tuesday to consider ‘very substantial’ economic relief measures, which may include a payroll tax cut.”
She added: “The stock market rally has always been a key proof of success for Donald Trump, and what has been happening in the market recently may pull the carpet from under his feet during the critical year of presidential election.
“So, if the Federal Reserve’s emergency action couldn’t give the market a jolt, then it wouldn’t be a surprise to see Donald Trump stepping in with massive fiscal measures to save the year.”
Source : Sky News