Europe led world stock markets back to higher ground on Thursday as tentative moves to reopen parts of the some of its larger coronavirus-hit economies and a bounce in oil offset some truly dismal global economic data.
Traders seemed determined to show more resilence to the torrent of gloomy figures having been sideswiped by the previous day’s IMF warning of a Great Depression-style world slump and record plunge in US retail sales.
The pan-European Stoxx 600 index batted off equally grim UK retail figures and more warnings of countries facing double-digit recessions to rise 1 per cent, while Wall Street futures were 0.8 per cent up despite another sky-high jump in US jobless claims.
Dublin’s Iseq index of shares was up 2.4 per cent at lunchtime with Cairn Homes and the property reits buoyed by reports that the construction may be one of the sectors to reopen first after the lockdown.
In the currency and bond markets both the euro and Italy’s bonds got a lift while speculation mounted that the European Central Bank was looking to prevent further stress in the country’s debt markets where debt-to-GDP now looks set to top 150 per cent this year.
"We have had this big wave of big announcements by governments and central banks and now we need to get into the nitty gritty of how it all works," said AXA Investment Managers chief economist Gilles Moec. "We need to see if it is working, how it is working and if we need to do more," adding that the speed of the recent rise in Italian bond yields had been concerning for the euro zone.
Markets may be seizing on the fact that policymakers, however reluctantly, are starting to allow stringent lockdowns to ease. Germany is proposing to reopen schools and some retailers starting on May 4th, while around 20 US states spared the worst of the coronavirus pandemic may start reopening their economies by US president Donald Trump's May 1st target date.
Firms are looking to restart as well. German carmakers Volkswagen and Mercedes-Benz will restart production at some German factories next week an in other countries a week later. But the economic figures are dire.
After the IMF’s forecasts for this year, markets are expecting China to report on Friday that first quarter gross domestic product (GDP) contracted for the first time on record, and hopes for a quick rebound are fading fast.
A Reuters survey showed that most Japanese firms feel stimulus announced so far is insufficient and Wednesday’s US data also showed manufacturing output there dropping the most in over 74 years.
Investment bank Morgan Stanley underscored the damage too as it posted a 32 per cent fall in its quarterly profit on Thursday.
Asia had had a more difficult session overnight. Tokyo's Nikkei dropped 1.3 per cent and MSCI's broadest index of Asia-Pacific shares outside Japan lost almost 1 per cent, wiping out early week gains that had taken it to a one-month high.
The risk-sensitive Australian dollar fell to a one-week low and commodity prices had struggled to rise against the expectation of cratering demand. Things turned in Europe though as the mood improved. Both Brent and US crude futures sprang up $1 to $28.75 and $20.22 per barrel respectively on hopes that the big build-up in stockpiles will level producers with little option but to deepen output cuts. – Reuters
