Coronavirus crash: Stocks recover ground as Trump pledges ‘relief’
Stock markets, including the FTSE 100, are staging a tentative recovery following their worst day since the 2008 financial crisis.
Monday saw a crash in values globally, blamed on a surge in COVID-19 cases and Saudi threats of an oil price war which combined to send investors running for the hills.
It culminated in the fifth-biggest one day fall in the FTSE’s history while trading in US shares was suspended after declines triggered so-called circuit breakers, designed to help limit intense volatility.
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Donald Trump, who has hailed record stock market values in recent times as a trophy of his presidency ahead of November’s election, later announced he would be taking “major” steps to guard the US economy against the impact of the coronavirusoutbreak.
He told the American people that a cut in payroll tax was among measures being considered to support workers and businesses.
Market analysts credited expectations of help on costs in the world’s largest economy for boosting sentiment on stock markets on Tuesday.
Japan’s Nikkei put on 0.8% as its prime minister promised to work with the central bank in calming markets.
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The Hang Seng in Hong Kong was 1.5% higher.
The FTSE in London rose by just over 1.2% at the open but later surged 4% higher – partly aided by a recovery in Brent crude oil, which was trading at $37 a barrel at one stage following Monday’s price collapse.
Gains in oil costs faded when Saudi Arabia confirmed plans to raise production by 2.6 million barrels per day in April following Russia’s refusal to help stabilise prices through output cuts.
Energy, travel, and mining stocks were seeing the greatest relief in London, with TUI, easyJet and Shell leading the way.
The MIB in Italy – a country under lockdown to fight the spread of COVID-19 – was open for business and trading 3.4% up after a fall of 11% on Monday.
US futures pointed to rises of more than 4% on Wall Street.
The gains reflect hopes that the fiscal response – the Trump administration’s promises of support – will have a real effect in the months to come as the coronavirus crisis deepens.
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The market shrugged off a big cut in interest rates by the Federal Reserve a week ago, as it failed to ease the potential for a crisis of supply ahead amid warnings of a possible global recession.
In the UK, the Bank of England has been working in coordination with the Treasury on how businesses can be supported ahead of possible supply chain disruption.
Among companies reporting their progress to the City on Tuesday, the furniture retailer DFS said it had just started to see an impact on customer numbers.
It refused to give guidance on expectations for the 12 months to June as the outbreak evolves but said it would expect weaker sales volumes in the short term to catch up later in the year.
Safestay, the hostel operator, warned of a “material reduction” in new bookings and cancellations.
The budget on Wednesday is expected to be used to announce support for UK firms – as chancellor Rishi Sunak pledges to give the NHS what it needs to deliver the best possible care.
Market analysts said volatility was likely to be high in Tuesday’s deals but the promise of US government help sent an early message that help was around the corner.
Commenting on the market moves, Ipek Ozkardeskaya, senior analyst at Swissquote Bank, said: “US equity futures rallied as US President Donald Trump announced that the White House and Congress will meet on Tuesday to consider ‘very substantial’ economic relief measures, which may include a payroll tax cut.”
She added: “The stock market rally has always been a key proof of success for Donald Trump, and what has been happening in the market recently may pull the carpet from under his feet during the critical year of presidential election.
“So, if the Federal Reserve’s emergency action couldn’t give the market a jolt, then it wouldn’t be a surprise to see Donald Trump stepping in with massive fiscal measures to save the year.”