NEW YORK, March 27 — A Wall Street rally powered global gains in stocks yesterday despite a record number of new unemployment filings in the United States, as traders focused on the unanimous passage of a US$2 trillion (RM8.72 trillion) coronavirus relief bill in the US Senate and the possibility of more stimulus to come.
The legislation is intended to flood the country with cash in a bid to stem the crushing impact the outbreak has already had on the world’s largest economy. Nearly 3.3 million Americans filed for unemployment benefits over the past week, eclipsing the previous record of 695,000 set in 1982. The bill is heading for the House of Representatives for a vote today.
“In less than two weeks, we have moved from full employment to a number of job destruction we have never experienced in a period of peace,” wrote Christopher Dembik, head of macro analysis at Saxo Bank.
Earlier yesterday, Federal Reserve Chair Jerome Powell said the US economy is likely in recession already but that reopening businesses should be dictated by the control of the virus’ spread, in contrast to the urging by some of President Donald Trump’s advisers for a faster reopening. The president himself has said he wants the economy to be “roaring” by Easter, in a little over two weeks.
The astronomical number of jobless filings left some wondering if the stimulus package, despite its size, would be enough.
“If these numbers continue for three or four weeks, there will be demand for more fiscal support,” said Quincy Krosby, chief market strategist at Prudential Financial in Newark, New Jersey.
She said the stock market reaction would suggest “that market participants expect a larger stimulus package or fiscal package from the government than the US$2 trillion that has been agreed upon.”
The Dow Jones Industrial Average surged 1,047.96 points, or 4.94 per cent, to 22,248.51, the S&P 500 gained 117.72 points, or 4.76 per cent, to 2,593.28 and the Nasdaq Composite added 300.37 points, or 4.07 per cent, to 7,684.66.
The pan-European STOXX 600 index rose 2.55 per cent and MSCI’s gauge of stocks across the globe gained 3.79 per cent.
Global stock markets have lost about a quarter of their value in the last six weeks of virus-driven selling.
While markets have found a measure of sustenance as governments and central banks launch unprecedented support measures, investors have struggled to work out how bad the coronavirus impact would be.
“No one is sure how long things are going to be locked down for, how wide the virus will spread in the US, what the death toll and hit on the economy will look like,” said Salman Baig, portfolio manager at Unigestion.
The combination of the massive jobless claims and stimulus dragged the dollar lower.
The dollar index, tracking the unit against six major currencies, fell 1.457 per cent, and was on track for its largest daily percentage decline since early June 2016.
The euro up 1.42 per cent to US$1.1034 and the Japanese yen strengthened 1.72 per cent versus the greenback at 109.35 per dollar, while Sterling was last at US$1.2127, up 2.04 per cent on the day.
“Although the latest Fed measures have helped calm markets, as long as the Covid-19 crisis continues and the world economy is effectively in lockdown, we would expect markets to remain in turmoil,” foreign exchange analysts at Bank of America said in a report yesterday.
The softer greenback buoyed emerging market currencies, with MSCI’s index on track for its largest daily percentage gain in nine months.
Oil fell as fears of plunging demand outweighed expectations of support from the US stimulus.
“Concerns around the demand outlook continue to worsen by the day,” said John Kilduff, a partner at Again Capital in New York. “It’s just incessant downward pressure.”
US crude recently fell 6.7 per cent to US$22.85 per barrel and Brent was recently at US$26.55, down 3.07 per cent on the day.
Prices on US Treasury bonds rose but yields traded relatively tightly and within the week’s range, suggesting the market had already priced in expectations for abysmal data.
Benchmark 10-year notes last rose 18/32 in price to yield 0.7985 per cent, from 0.856 per cent late on Wednesday. The 30-year bond last rose 45/32 in price to yield 1.3683 per cent, from 1.421 per cent late on Wednesday. — Reuters