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London, United Kingdom | AFP | Stock markets shot higher Tuesday as investor hopes for a quick economic recovery were fuelled by a massive Federal Reserve stimulus programme and evidence of US consumers flocking back to shops.
The rally was rooted also in reports that US President Donald Trump is considering a $1.0-trillion infrastructure investment package.
An unprecedented rise in US retail sales for May, pointing to a vibrant recovery in business activity, made for a welcome surprise across trading floors.
“Retail spending in May surged by the biggest one-month increase of all time,” said Fawad Razaqzada, an analyst with ThinkMarkets.
“This is clearly good news and adds to the biggest rise in May employment we saw a couple of weeks ago.”
The dollar rose against the euro in response.
News that Britain will start giving dexamethasone to coronavirus patients, after a trial showed the steroid saved the lives of one third of the gravest cases, gave a further boost to the mood.
Tuesday’s gains helped wipe out some of the heavy losses suffered Monday caused by new virus cases around the world — including in Beijing, Florida, Texas and Tokyo.
– ‘Addictive stimulus high’ –
The Fed’s Main Street Lending Program and an emergency lifeline under which the Fed will buy up to $750 billion in corporate bonds were a big factor in the recovery.
Wall Street was solidly higher in the late New York morning with a gain of around 500 points on the Dow, but off opening highs after Fed chief Jerome Powell said there were still “significant uncertainties” surrounding a US economic recovery.
European stocks were also below their best levels as profit-taking set in, but key markets still added three percent or more at the close.
Earlier, Asian markets had already closed stronger, with Tokyo’s main stocks index winning an extra boost from a Bank of Japan move to ramp up aid for firms struggling with virus fallout.
“The formal start of the Fed’s corporate bond-buying programme boosted global sentiment,” said City Index analyst Fiona Cincotta.
“Adding to the seemingly addictive stimulus high, the Trump administration is weighing up a $1-trillion infrastructure spend to spur on the economy in the wake of the coronavirus crisis.”
The Fed had in recent weeks stated that it was on the verge of rolling out the Main Street scheme, but held off as it expanded the criteria to reach more struggling companies.
– Key figures around 1540 GMT –
London – FTSE 100: UP 2.9 percent at 6,242.79 points (close)
Frankfurt – DAX 30: UP 3.4 percent at 12,315.66 (close)
Paris – CAC 40: UP 2.8 percent at 4,952.46 (close)
EURO STOXX 50: UP 3.4 percent at 3,242.65
New York – Dow: UP 1.9 percent at 26,245.04
Tokyo – Nikkei 225: UP 4.9 percent at 22,582.21 (close)
Hong Kong – Hang Seng: UP 2.4 percent at 24,344.09 (close)
Shanghai – Composite: UP 1.4 percent at 2,931.75 (close)
West Texas Intermediate: UP 1.7 percent at $37.75 per barrel
Brent North Sea crude: UP 1.5 percent at $40.30
Euro/dollar: DOWN at $1.1257 from $1.1323 at 2100 GMT
Dollar/yen: DOWN at 107.32 yen from 107.33 yen
Pound/dollar: UP at $1.2682 from $1.2605
Euro/pound: DOWN at 89.48 from 89.83 pence
