Global Stocks Rise on Hopes of Help Over Coronavirus

Global Stocks Rise on Hopes of Help Over Coronavirus

Global financial markets were lifted early on Tuesday by the prospect of more help from the world’s central banks in battling the economic impact of the coronavirus

European stocks were up about 2 percent in morning trading. Taiwan led more modest rises in Asia. Oil prices rose in another sign of improved investor sentiment. European stocks opened more than 1 percent higher.

Futures markets were more downbeat, predicting stocks in the United States would fall modestly at the open on Tuesday.

Any drop would follow a major jump on Monday. In the United States on Monday, the S&P 500 booked its biggest single-day gain since late December 2018, after the news that central bankers from the world’s biggest economies would join a conference call with Group of 7 finance ministers on Tuesday to discuss a response to the outbreak, fueling expectations that governments might lower interest rates in tandem.

Until Monday, trading in financial markets had been governed by increasingly dire economic projections tied to the coronavirus, which is spreading outside of China to South Korea, Italy, France and the United States, idling factories, quarantining workers and curtailing international travel.

If they last, preventive measures like travel limits and partial quarantine could have far-reaching implications. Airlines, hotels and conference centers might suffer. Consumer spending, the backbone of an 11-year-long economic expansion in the United States, could weaken.

On Monday, the Organization for Economic Cooperation and Development said global growth could plummet to just 1.5 percent in 2020, far less than the 3 percent it projected before the virus surfaced, should the outbreak sweep through the Asia-Pacific region, Europe and North America. If things get bad enough, Japan and Europe could plunge into recession, the O.E.C.D. warned.

Predictions for the United States were nearly as bad: Most analysts expect zero or negative growth in the second quarter, with some forecasting a potential recession before year’s end.

Central banks in Australia and Malaysia made their own moves on Tuesday, cutting rates to bolster their economies.

Stocks in Taiwan led the rally in Asia, with the Taiex index up 1.4 percent. Stocks in the rest of the region were more restrained. In China, the Shanghai Composite Index rose 0.7 percent.

Japan bucked the trend, with the Nikkei 225 index falling 1.2 percent. Shares in Hong Kong ended flat.

The major European indexes — London’s FTSE 100, Germany’s DAX and France’s CAC 40 — were all up about 2 percent in morning trading.

Economic policymakers took action on Tuesday to shore up their economies as the impact of the coronavirus begins to threaten global growth.

The Reserve Bank of Australia cut its interest rates to a record low, while Malaysia’s Bank Negara cut its key lending rate for a second time this year.

Other top central bankers have indicated they are willing to step in and even make a coordinated response. They will join finance ministers from the Group of 7 in an emergency call on Tuesday to talk about how to respond to the spread of the virus and its impact on economic growth.

The International Monetary Fund and the World Bank have also said they are standing by to take action.

Philip Lowe, Australia’s central banker, on Tuesday said the virus outbreak was having a “significant effect” on travel and education sectors. The central bank lowered its rate by one quarter of a percentage point to a new low of 0.5 percent.

Malaysia’s central bank said it expected the economy to “gradually improve” in the second quarter of this year but flagged some risks “stemming from the evolving nature and prolonged impact of the Covid-19 outbreak.” It also lowered rates by one quarter of a percentage point to 2.5 percent.

Major stock indexes in Australia and Malaysia both rose 0.7 percent.

Before Monday’s rally, the S&P 500 had dropped more than 11 percent in a week. That’s its worst weekly decline since the 2008 financial crisis, and a drop that pushed it into what’s known as a correction — a drop of 10 percent or more, representing a psychologically significant marker for investors.

But Monday’s surge meant that the correction lasted only nine days, which, according to Yardeni Research, was the shortest on record in terms of calendar days since 1928, the earliest date for which the research group has published data on the S&P.

The previous two corrections in the S&P 500 were both in 2018, when the market fell 10.2 percent for 13 days ending in February and 19.8 percent for 95 days ending in December.

Late on Monday, Hyatt Hotels withdrew its financial forecasts for 2020, in part because of the impact of travel restrictions imposed by companies since the virus outbreak, saying its ability to assess the impact of the virus “continues to be limited because of quickly changing circumstances and uncertain consumer demand for travel.”

Twitter, which had already closed offices in Japan and South Korea and banned nonessential travel, on Monday encouraged all of its employees in the United States and other countries to work from home. And its chief executive, Jack Dorsey, pulled out of a speaking engagement at South by Southwest, an annual technology conference and music festival scheduled to be held in two weeks in Austin, Tex.

Reporting was contributed by Kate Conger, Alexandra Stevenson, Jeanna Smialek, Kevin Granville, Carlos Tejada, and Jack Ewing.

Leave a Reply

Your email address will not be published. Required fields are marked *