Markets Mar 25

Markets surge on US stimulus hopes

Asian markets rose after US stocks jumped 11% amid upbeat sentiment and hope that the Senate will pass a $2-trillion support bill

Markets sustain gains on US stimulus hopes
A giant American flag has been hung over the New York Stock Exchange, which saw stocks rebound more than 11% overnight. Photo: Getty / AFP  

(ATF) Investor sentiment remains upbeat on hopes the US Senate will pass the $2 trillion stimulus bill and boost the world’s largest economy despite the virus count reaching 418,000 globally and the death toll passing 18,600.

The US fiscal package equivalent to around 10% of annual US GDP, includes support for hospitals, greater unemployment benefits, cash payments to households, and loans to businesses.

Also on Monday, Germany approved an emergency budget, equivalent to 3.6% of GDP.

“We think the actions of monetary and fiscal policymakers should help prevent a Global Financial Crisis (GFC) style credit crunch. Today's sharp equity rally shows that the combination of central banks’ entire GFC playbook and substantial, direct fiscal support can be well received by markets,” Mark Haefele, UBS Global Wealth Management's chief investment officer, said.

This morning, Asian markets sustained their gains and Japan’s Nikkei 225 has jumped 5.14%, while the Australian S&P ASX 200 was 3.1% higher, Korea’s KOSPI advanced 3.8% and Hang Seng index climbed 3.4%. Regionally, the MSCI Asia Pacific ex-Japan index is up 2.7%.

The S&P futures are down 0.7% after Wall Street made eye-popping gains from 3-year lows. The Dow Jones Industrial Average soared nearly 11.4%, the S&P 500 surged 9.4% and the Nasdaq Composite jumped 8.1%.

Bloomberg estimates that about $26 trillion of value has been wiped out from the stock markets globally as the economic impact of the pandemic reverberated across the world as infections and deaths rose.

China revenue down nearly 10%

In the latest setback to the world’s second largest economy, data published on Tuesday showed China’s fiscal revenue contracted 9.9% in January-February from a year ago, when it had expanded 3.8%. There were similar contractions in tax revenues, land sales and fiscal expenditure as the country weathered a lockdown, the severity of whose impact was seen worsening.

“Since the lockdowns only commenced on 23 January, the sharp contraction of fiscal revenues only reflect part of the January-February period, and that is why we believe fiscal data in March could be worse,” Nomura strategist Ting Lu said in a note. Lu said the outlook for growth remained downbeat given the slump in external demand and the risk of a second wave of infections in China.

“Markets still appear too optimistic. We believe the Covid-19 outbreak in China and throughout the world will significantly weigh on domestic growth, corporate profits and government revenue in the months that follow,” Lu said, while forecasting China’s full year GDP would grow by just 1.3%, a big drop from 6.1% in 2019.