Asian shares jump after Dow’s biggest gain since ’33

BANGKOK (AP) — Shares leaped in Asia yesterday after the Dow Jones Industrial Average surged to its best day since 1933 as Congress and the White House reached a deal on injecting nearly USD2 trillion of aid into an economy ravaged by the coronavirus.

Japan’s Nikkei 225 index jumped eight per cent, while Hong Kong added 3.3 per cent and Sydney climbed 5.5 per cent. Markets across Asia were all up more than two per cent.

Tokyo share prices were also lifted by the decision to postpone the 2020 Olympics to July 2021 in view of the coronavirus pandemic, which has brought travel almost to a standstill and is leaving many millions of people ordered to stay home to help contain the outbreaks. The postponement alleviated fears the event might be cancelled altogether.

United States (US) futures turned higher after lawmakers said they had bridged their differences over the stimulus package.

The future for the Dow rose 1.1 per cent to 20,839.00 and the contract for the S&P 500 picked up 0.4 per cent to 2,399.80.

That followed a stunning 11.4 per cent surge in the Dow overnight. The more closely followed S&P 500 index leaped 9.4 per cent as a wave of buying around the world interrupted what has been a brutal month of nearly non-stop selling.

A currency trader walks by screens showing the Korea Composite Stock Price Index (KOSPI), and the foreign exchange rate between the US dollar and South Korean won at the foreign exchange dealing room in Seoul, South Korea. PHOTO: AP

Economists and investors expect to see some dire measures of the impact of the virus in coming days and weeks, and few believe markets have hit bottom. Rallies nearly as big as this have punctuated the last few weeks, and none lasted more than a day.

The breakthrough in the US Congress on the stimulus package was another welcome boost to sentiment. Both Democrats and Republicans worked throughout on Tuesday to thrash out the agreement on the massive economic rescue package, which will include payments to US households and aid for small businesses and the travel industry, among other things.

Now that the Federal Reserve has done nearly all it can to sustain markets, pressure is on Congress to act. Ultimately, investors said they need to see the number of new infections peak before markets can find a floor.

The increasing spread is forcing companies to park airplanes, shut hotels and close restaurants to dine-in customers.

“It’s sort of like, keep the patient alive in the emergency room so you can provide some treatment options,” said Chief Investment Officer at Northern Trust Wealth Management Katie Nixon.

The Dow rose 2,112.98 points, its biggest point gain in history, to 20,704.91.

The S&P 500, which is much more important to most 401(k) accounts, rose 209.93, or 9.4 per cent, to 2,447.33 for its third-biggest percentage gain since World War II. The Nasdaq composite jumped 557.18 points, or 8.1 per cent, to 7,417.86. Tokyo’s Nikkei closed at 19,546.63, while the Hang Seng rose to 23,403.36.

South Korea’s Kospi gained 4.1 per cent to 1,704.76 and the S&P/ASX 200 picked up closed at 4,998.10. Taiwan’s benchmark jumped 3.8 per cent. Shares were also higher in Southeast Asia.

US crude oil gained 78 cents to USD24.79 per barrel in electronic trading on the New York Mercantile Exchange. Brent crude, the international pricing standard, added 63 cents to USD30.37 per barrel.

In currency trading, the US dollar was flat at 111.22. The euro rose to USD1.0825 from USD1.0790.

Earlier share rebounds have evaporated. Since stocks began selling off on February 20, the S&P 500 has had six days where it’s risen, and all but one of them were big gains of more than four per cent. Afterward, stocks fell an average of five per cent the next day.

The VIX index, a proxy for equity market volatility, remains relatively high, “suggesting that underlying risk sentiment may stay cautious as investors remain wary on the pace of the infection spread, with total confirmed Covid-19 cases exceeding 400,000 globally,” Mizuho Bank said in a commentary.

Analysts said the pronouncement wasn’t a contributor to the day’s huge rally, which was mostly due to the stimulus hopes.

“Given the enormity of the package, it will most certainly be well initially well-received as it should be sufficient to avoid buttress ‘Main street’ from falling into worst-case, depression type scenarios, especially with the Fed prepared to monetise all the US government’s debt,” Stephen Innes of AxiCorp. said in a commentary.

For most people, the coronavirus causes only mild or moderate symptoms, such as fever and cough. Those with mild illness recover in about two weeks. Severe illness including pneumonia can occur, especially in the elderly and people with existing health problems. Recovery could take six weeks in such cases.

Governments and central banks in other countries are unveiling unprecedented levels of support for their economies in an attempt to limit the scale of the upcoming virus-related slump.

Germany, a bastion of budgetary discipline, also approved a big fiscal boost. Thailand announced USD3.6 billion in stimulus on Tuesday as its prime minister announced a state of emergency likely to bring stronger restrictions on business and travel.

Measures of the shock to the world economy from the pandemic are just beginning to show the extent of its toll on business and livelihoods. In the US, a preliminary reading on business activity in March showed the steepest contraction on record, going back to 2009. Reports were also gloomy for Europe.