Global stocks falter after two days of big gains
Global markets fell on Thursday, as this week’s sharp rally lost steam despite the passage of a $2tn coronavirus relief package in the US.
London’s FTSE 100 lost 1.8 per cent in morning trading, giving back some of this week’s gains of 10 per cent. The Stoxx 600 index, which tracks Europe’s largest companies, was 1.7 per cent lower as the region’s major bourses all fell.
Markets had shot higher this week following nearly a month of sustained losses, as investors have broadly welcomed significant global monetary and fiscal stimulus programmes.
But with large stretches of the western world under lockdown, analysts said that stimulus measures could only do so much to support the rebound in global markets and evidence of a slowdown in the pace of new infections was now needed. Total confirmed cases of coronavirus have climbed to over 470,000 globally, with deaths surpassing 21,000.
“The eurozone and UK economies are facing a recession of 2 per cent for 2020,” said S&P Global Ratings senior economist Marion Amiot
“The relatively swift recovery that we expect to start in the second half of 2020 will still take time, as job losses and uncertainty will slow the return to previous levels of consumption, investment, and trade,” the rating agency added in a report released on Thursday.
On Wednesday Wall Street recorded its first back-to-back daily gains in more than a month, but futures markets pointed to a fall of 1.4 per cent for the S&P 500 later in the day.
Asian markets fell, with Japan’s benchmark Topix index down 1.8 per cent a day after the country’s capital reported a record jump in new infections.
The losses for Japanese stocks came as store shelves in Tokyo were stripped by residents hoarding goods a day after Yuriko Koike, the city’s governor, called on residents to stay home over the coming weekend.
Investors are looking ahead to US employment data, which analysts expect will show a sharp rise in jobless claims to 1.6m in the week to March 21.
“Widespread hopes for a V-shaped recovery from the impending recession will probably be dashed,” said Charles Dumas, chief economist at TS Lombard, who said the US unemployment rate will rise to more than 10 per cent in April.
The wide range of estimates for the data, “show that we lack historical references to really understand the impact of this unique and probably massive crisis hitting the economy,” said Christopher Dembik, head of macro analysis at Saxo Bank.
The stumble for stocks came despite the US Senate late on Wednesday passing a stimulus bill that would provide support to taxpayers and businesses hit by coronavirus.
James McCann, senior global economist at Aberdeen Standard investments, warned that Washington could find itself “back at square one” if the economic hit to the US from coronavirus outweighs the support offered by the package.
“We’ve already seen unsettled markets overnight off the back of fears about the speed of the pandemic’s spread,” he said. “The challenge for the stimulus package is keeping pace with the pandemic.”
Investors are also concerned that the support package — which needs approval from the House — could face further obstacles.
“The main concern now is around implementation — cash needs to flow rapidly to where it’s most needed,” said Anna Stupnytska, head of global macro and investment strategy at Fidelity International.
“Bureaucratic and distribution obstacles could slow this process down by weeks or even months — a delay the US economy cannot afford,” she added. “Any hold-up could result in a longer and, possibly, deeper recession, extending into the second half of the year.”
Haven assets gained amid jittery markets. The 10-year US Treasury yield fell 0.04 percentage points to 0.814 per cent. Brent crude oil fell nearly 1.5 per cent to $27. Get alerts on Equities when a new story is published