Coronavirus: US stocks lift on stimulus measures despite Europe turmoil
US stocks lifted slightly on the open this afternoon as traders reacted to massive amounts of government stimulus aimed at containing the coronavirus crisis.
The S&P 500 dipped 0.5 per cent before rising just 0.1 per cent and the tech-heavy Nasdaq rose 1.3 per cent. The Dow Jones posted a 0.5 per cent rise shortly after 2pm.
The FTSE 100 saw morning gains of five per cent dwindle back to just 1.2 per cent as Spain and Germany revealed their coronavirus cases rise by almost 3,000 each overnight.
And Italy called in the army to impose a lockdown in Lombardy, the country’s worst hit region.
“The request to use the army has been accepted,” Lombardy president Attilio Fontana said today. “And 114 soldiers will be on the ground throughout Lombardy. It is still too little, but it is positive.”
The World Health Organization has now called Europe the new epicentre of coronavirus, after Italy’s death toll surpassed China’s death toll yesterday.
US stocks still rose despite the negative developments in Europe due to huge amounts of stimulus central banks and governments have been pouring into their economies.
US President Donald Trump hinted he could intervene in a raging oil price war between Saudi Arabia and Russia yesterday. That came after the US Federal Reserve cut rates almost to zero.
And the Bank of England slashed rates to a historic low of 0.1 per cent. It also announced £200bn of quantitative easing, after the government pledged £330bn in loans for struggling businesses.
Raffi Boyadjian, senior analyst at online trader XM, said the Nasdaq’s strong 2.3 per cent finish yesterday showed some resilience among tech sector US stocks.
“The tech-heavy index has not fallen by as much as the Dow Jones during the latest sell-off, suggesting investors think technology companies are more immune to the virus crisis than more traditional companies,” he said.
“Sentiment started to turn around yesterday as more central banks announced emergency policy measures to help their economies cope under the strain of national lockdowns and business paralysis.
“It comes as the death toll from the coronavirus continues to rise at a worrying level, especially in Italy, which has now overtaken China as the epicentre of the outbreak.”
But Deutsche Bank today drastically downgraded its UK growth forecast for 2020 and warned coronavirus could cause “potentially the worst recession for a century”.
Deutsche slashed a 0.5 per cent growth prediction to minus 4.2 per cent.
“Further downward revisions across the globe should hit trade and supply chains significantly over the coming months,” it warned.
“More importantly, self-containment/quarantine measures will likely be more protracted than we initially envisaged, significantly impacting both household consumption and business activity.
“This should result in the biggest drop in quarterly growth on record in the second quarter (-7.5% q-o-q) with the unemployment rate expected to rise over eight per cent.”
The UK is expected to announce measures to support staff wages today to avoid a mass wave of layoffs.