Picture: 123RF/SOLAR SEVEN
Picture: 123RF/SOLAR SEVEN

London — World stock markets enjoyed a second day of sharp gains on Tuesday as signs of progress against the coronavirus in both Europe and the US, and more liberal helpings of stimulus, kept investors charging back in.

There was an added boost from commodity markets as oil climbed nearly 3% on supply-cut hopes, while currency markets also came alive as a tumbling dollar saw the euro race out of a six-session rut of falls.

Equities was where the main action was, however. Japan’s Nikkei followed up Wall Street’s 7% surge on Monday with a 2% jump as its government promised a near $1-trillion stimulus package — equal to a fifth of its GDP.

Europe quickly got in the swing of things, too. The pan-European Stoxx 600 index climbed more than 3% as the respective markets in London, Frankfurt, Paris and Milan all bounded higher.

“A day does not a trend make, a week does not a trend make ... but we think the market is bottoming out,” said Jeff Mortimer, director of investment strategy at BNY Mellon Wealth Management. “We are trying to get clients to understand that [in market performance terms] better times ahead can come more quickly then expected.”

Worldwide, the virus has infected more than 1.3-million people, with about 285,000 of those recovered, and killed more than 75,000, and though the numbers are still rising in many highly populated countries, some tentative improvements have given hope.

In hardest-hit Italy and Spain, authorities have started looking ahead to easing lockdowns after steady falls in fatality rates. In the US too, the daily number of deaths in the country’s worst-affected area, New York, has also shown signs of steadying.

The dollar, which has been soaking up safe-haven flows for weeks, slipped against most major currencies.

The euro shot up 0.7% to $1.0865 to snap a six-day run of falls, the pound climbed despite Britain’s Prime Minister remaining in intensive care, and the Australian dollar jumped more than 1.5% to its highest in a week. New Zealand’s dollar rose 1.3%, too, while the yen shook off an early dip to clamber up to ¥108.92 to the dollar.

It wasn’t only oil driving commodities markets higher either, copper punched up to a three-week high with a 3% gain for industrial metals, while safe-haven gold wilted.

Benchmark 10-year US treasuries and German bund continued to lose out too. US yields — which move inverse to price — rose to 0.73% having fallen almost nine basis points (bps) on Monday, and bund yields were up 6bps to 9bps across the curve.

The Eurogroup of finance ministers within the single eurozone currency bloc are scheduled to meet later on Tuesday, and analysts expect more joint action to help prop up the economies of member states.

Cyprus, one of the lower-rated countries in the bloc, is marketing a seven-year and 30-year bond issuance. In Asia, Indonesia issued a 50-year bond.

“Investors have recently been detecting growing public support for the concept of coronabonds in European Commission and European Central Bank (ECB) circles,” said DZ Bank analyst Daniel Lenz, adding that German ECB executive board member Isabel Schnabel is among those who appear to voice support.

Reuters