Markets

Wall St jumps 2% on hopes of lockdown easing

Analysts said the threat of deeper and prolonged downturn was starting to dissipate

Photograph: Boris Roessler/AFP/Getty Images

Tue Apr 14 2020 - 16:35

Wall Street rose more than 2 per cent on Tuesday on signs some economies would ease strict coronavirus-induced lockdowns, with investors also looking at quarterly earnings from JPMorgan and Johnson & Johnson for clues on the business hit from the outbreak.

Early gains were broad based with a 4.3 per cent jump for Apple powering a 3 per cent rise in the tech-heavy Nasdaq as data showed iPhone shipments to China rebounded slightly in March after crashing in February.

US stock markets have recovered in the past month after slumping more than 30 per cent from their February record highs, supported by a raft of monetary and fiscal stimulus and early signs of a plateauing in the number of coronavirus cases.

However, S&P 500 firms are still off about $4.7 trillion in market value and analysts have warned of a torrid earnings season as sweeping lockdown measures ground business activity to a shuddering halt.

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Profits at JPMorgan Chase & Co and Wells Fargo & Co plunged in the first quarter, as both banks set aside billions of dollars to cover potential loan-losses from the pandemic.

However, their shares rose between 1 per cent and 1.8 per cent, after slumping 29 per cent and 40 per cent respectively so far this year as the health crisis halted deal-making.

Coronavirus-fuelled uncertainty also forced Johnson & Johnson to cut its 2020 adjusted profit forecast, but its shares rose 4.1 per cent as it boosted its quarterly dividend, signalling financial stability at a time when a slate of blue-chip firms have suspended dividends to shore up cash reserves.

“It should come as no surprise that earnings are going to be hit very hard in 2020,” said Fiona O’Neill, deputy head of equities research at Fidelity International in London.

“But it would be wrong to focus too much on 2020. Instead, we must look to forecast where earnings will go in 2021 and beyond so that we can continue to identify those companies that are going to emerge from this as winners.”

At 10.24am eastern time, the Dow Jones Industrial Average was up 605.91 points, or 2.59 per cent, at 23,996.68, while the S&P 500 was up 77.31 points, or 2.80 per cent, at 2,838.94. The Nasdaq Composite was up 274.63 points, or 3.35 per cent, at 8,467.05.

US president Donald Trump said late on Monday his administration was close to completing a plan to re-open the economy, but some state governors said the decision to re-start businesses lies with them.

“The ‘turned the corner’ narrative has a strong immediacy, but there remain creeping concerns about a slow economic re-opening and lasting changes to consumer spending,” said Yung-Yu Ma, chief investment strategist at BMO Wealth Management in Portland, Oregon.

Tesla surged 12.9 per cent and was among the top boosts to the Nasdaq after brokerage Credit Suisse upgraded the electric carmaker’s stock to “neutral”.

The S&P 1500 airlines index gained 7.1 per cent as sources said some large US passenger airlines were close to accepting the terms of a $25 billion offer for government payroll aid.

Advancing issues outnumbered decliners more than 9-to-1 on the NYSE and 6-to-1 on the Nasdaq.

The S&P index recorded seven new 52-week highs and no new low, while the Nasdaq recorded 20 new highs and two new lows.

Elsewhere, European stock markets opened stronger, with the pan-European STOXX 600 index rising 0.5 per cent to its highest since March 11th.

Spanish shares gained as much as 1.5 per cent as some businesses reopened, although shops, bars and public spaces were set to stay closed until at least April 26th.

“Although further slowdown in the pandemic’s spreading may keep sentiment supported, we are still reluctant to trust a long-lasting recovery, and we prefer to take things day by day,” said Charalambos Pissouros, analyst at JFD Group.

Market sentiment was boosted by data showing China’s exports fell only 6.6 per cent in March from a year ago, less than the expected 14 per cent plunge. Imports fell 0.9 per cent compared with expectations for a 9.5 per cent drop.

The gains in Europe took MSCI's All-Country World Index, which tracks shares across 49 countries, up 0.5 per cent.

Earlier, Chinese shares gained, with the blue-chip index up 1.2 per cent. Australian shares were up 1.7 per cent and Japan's Nikkei rose 2.8 per cent. Hong Kong's Hang Seng was up 0.9 per cent.

MSCI's broadest index of Asia-Pacific shares excluding Japan rose 1.3 per cent to its highest in a month, up 20 per cent from a four-year low on March 19.

Investors are now eyeing the easing of virus-related restrictions in some regions for further trading cues.

In Europe, thousands of shops across Austria are set to re-open on Tuesday. Spain recorded its smallest proportional daily rise in the number of deaths and new infections since early March and let some businesses return to work on Monday.

Oil prices plunged around 5 per cent on Tuesday as investors doubted that record OPEC+ supply cuts would soon balance markets as demand plunges due to the coronavirus pandemic.

Brent crude futures fell $1.60, or 5 per cent, to $30.14 a barrel by 3.23pm GMT. US West Texas Intermediate crude was down $1.25, or 5.5 per cent, to $21.15 a barrel.

Global oil producers worldwide are expected to cut overall output by roughly 19.5 million barrels per day, or nearly 20 per cent of world supply.

Gold prices clung to highs not seen in more than seven years at $1,720.1 an ounce.

In currencies, sterling rose to one-month highs versus the dollar and euro on Tuesday, as signs that lockdown measures may be slowing the spread of the novel coronavirus strengthened currencies seen as riskier bets.

The pound has benefited from improved risk sentiment this month as some countries consider reopening their economies, even as experts warn Britain may be on course to become the worst-affected country in Europe.

News over the weekend that Prime Minister Boris Johnson had left hospital and was recovering from COVID-19, the respiratory disease caused by the virus, has also helped support the pound.

The dollar extended losses on the back of the US Federal Reserve’s massive new lending programme. It weakened against the Japanese yen to 107.7.

The euro was up 0.2 per cent at $1.0929. The risk-sensitive Australian dollar jumped 0.6 per cent to $0.6420. – Reuters

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