Asia markets soar after US stocks see biggest gains since 1933 on US$2 trillion stimulus progress

Deb Price

Asia-Pacific markets continued to rally on Wednesday after a historic surge in US equities, triggered by reports that the US Congress is close to a deal on a US$2 trillion stimulus package to battle the coronavirus pandemic.

The Hang Seng Index shot up 3.8 per cent, in its first back-to-back gains in more than five weeks.

Tencent Holdings rose 4 per cent, while WH Group shot up 11.2 per cent while Alibaba Group Holding, the e-commerce giant and owner of the South China Morning Post, gained 3 per cent.

The Shanghai Composite Index closed with a 2.2 per cent gain. (For in-depth coverage of the Hong Kong and mainland markets, see the Live Stocks Blog.)

Overnight, the Dow Jones Industrial Average surged more than 11 per cent in its biggest gain since 1933, during the Great Depression. Still, volatile global equity markets have taken a US$26 trillion hit since mid-February, according to a Bloomberg report.

More than 18,000 people worldwide have died of the coronavirus. Roughly 3 billion people are in lockdown around the globe, after India on Tuesday told its 1.3 billion residents to stay inside their homes.

The virus has sent every major stock market except in China into bear territory. Investors are paying close attention to the world’s fiscal and monetary policy response to the virus as well as the science behind its deadly path.

In the US, home of the world’s largest economy, Senate leaders and the Trump administration reached agreement in the wee hours Wednesday on a US$2 trillion stimulus package. Swift passage is expected by the Congress as is the signature enacting it into law by President Donald Trump.

Huge interventions by the world’s central banks and governments to deal with the economic consequences of the spreading respiratory ailment have boosted risk sentiment from Hong Kong to New York. The US Federal Reserve this week launched unlimited bond buying and took other steps to shore up the economy and make borrowing cheap.

But Asia gains today are premature, says Edward Moya, senior market analyst, New York, at OANDA, given the grim news on the virus.

“There is a lot of momentum behind this risk-on move, but the news on the virus front is getting worse and it seems a bit premature to cheer the massive US fiscal stimulus bill before it is finalised and all the details are revealed,” Moya wrote in a note.

“Volatility is likely to remain on overdrive and it will be difficult to imagine a scenario that will see global equities further advance throughout the remainder of the week,” he wrote.

US stocks soar on hopes for a US$2 trillion stimulus deal

So far this week, Asia-Pacific markets have continued to see the big swings of late. In Wednesday trading, they extended Tuesday’s gains after big falls on Monday. The boost in equity sentiment largely reflects the US Fed’s steps, which will mean more liquidity in the rest of the world as well, analysts said.

Seoul’s Kospi closed up 5.9 per cent, after its 8.6 per cent jump Tuesday. The tech-heavy Kosdaq, which shot up 8.3 per cent on Tuesday, rose 5.3 per cent.

Tokyo’s Nikkei 225, which jumped 7.1 per cent Tuesday, went up 8 per cent. The Tokyo Olympics were officially postponed overnight, the first time in history that has happened, but the market had already factored it in.

Australia’s S&P/ASX200, which rose 4.2 per cent Tuesday, increased 5.5 per cent.

New Zealand’s S&P/NZX50, which shot up 7.2 per cent Tuesday, rose 1.7 per cent.

Strong gains were seen in early trading in the UK and Europe. US futures showed gains as of 5 o’clock Hong Kong time.

The death toll in the US has risen to more than 700. The World Health Organisation said Tuesday the US may be the new epicentre as US cases increased by 32 per cent from the previous day’s figures.

The economic costs of the virus are mounting. Already, the US is seeing a huge spike in jobless claims. One Federal Reserve official said the jobless rate could soar to 30 per cent in the second quarter, while the gross domestic product could be cut in half.

“When does risk sentiment turn on bright? Everyone is looking for a canary in the coal mine. Still, ultimately for risk sentiment to turn back on bright, investors need conclusive evidence of coronavirus infection curves flattening, bringing an end to lockdowns in sight,” said Stephen Innes, chief global strategist at currency trading platform AxiCorp.

César Pérez Ruiz, head of investments and chief investment officer at Pictet Wealth Management, is staying underweight in equities due to coronavirus uncertainties and says Italy will be a bellwether for what’s ahead. Italy, with the world’s largest number of deaths at more than 6,800, is in lockdown.

“[W]e prefer active stock picking, especially among low-leveraged equities, as well as quality credit in fixed income. This week, whether we see Italy’s coronavirus cases begin to fall following the extensive containment measures taken will be a key bellwether of an end to the crisis,” he wrote.

Additional reporting by Louise Moon

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