Stock market surge sticks as $2trn US stimulus moves closer
A rebound in coronavirus-hit stock market values is holding amid signs the hotly anticipated $2trn US stimulus package will be signed off later on Wednesday.
The Dow Jones Industrial Average had its best session, in percentage terms, since 1933 while the FTSE 100 gained the most in a day for 12 years on Tuesday as evidence mounted a deal had been done pending crucial Congressional votes.
The package is expected to include direct payments to US households and aid for small businesses, the travel industry, hospitals and local government as the country gradually shuts down to fight COVID-19.
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Political wrangling over the Bill’s contents in the world’s largest economy meant it was the elephant in the room for investors following a slew of economic support from other governments and central banks globally.
Asian stocks followed the US and Europe in making big strides in Wednesday deals – with Japan’s Nikkei rising by 5.3% while Hong Kong was 3% up.
The FTSE in London added 1.7% at the open to hit 5,540 points while the DAX in Frankfurt and CAC in Paris were 2% up.
US futures also turned positive.
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Jasper Lawler, head of research at London Capital Group, said: “Investors are buying with some pragmatic hope.
“The hope is that strict ‘stay home’ measures and a whole lot of government and easy money stimulus will get us through this.
“Investors have been waiting for the US to take the lead on global stimulus efforts.
“The Fed have done their bit. It looks like lawmakers will too on Wednesday according to White House official Eric Ueland.
Coronavirus: The infection numbers in real time
Coronavirus: The infection numbers in real time
“We’re expecting a deal in the region of $ 2trn including every American getting cut a check (cheque).”
There was a further steady stream of companies warning of a coronavirus impact in updates to the City on Wednesday morning.
Bicycle-to-car products retailer Halfords said it was planning for a 25% collapse in sales in its next financial year, beginning in April.
It told shareholders the dividend was to be suspended as part of moves to save cash but said it was confident it could operate within its current debt facilities.
Housebuilder Bellway said its half-year dividend was to be delayed and it would suspend purchases of new land.
As the PM faces pressure to intensify the current lockdown regulations amid anger from builders, the company confirmed it was currently continuing to operate – in line with the guidance – but would close sites by the end of the week.
Persimmon said it was also starting an “orderly shutdown” of its construction sites.
There was also news on the UK economy from the Office for National Statistics (ONS), as it operates new release timetables for key data during the crisis.
It reported that the Consumer Price Index measure of inflation fell to 1.7% in February from 1.8% in January.
Mike Hardie, head of inflation at the ONS, said: “There was a slight slowing in the rate of inflation due mainly to falling prices for motor fuels and computer games.”
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