Global Markets Follow U.S. Higher

Global markets largely extended gains, after major indexes in the U.S. jumped more than 7% amid early signs that lockdowns could be helping stem the coronavirus pandemic internationally.

While the U.S. coronavirus death toll surpassed 10,000, new models suggested infections in some of the worst-hit American cities, including New York, Detroit and New Orleans, were expected to peak in the coming days.

New York Gov. Andrew Cuomo said daily deaths from Covid-19, the disease caused by the virus, had been “effectively flat” in his state for the past two days, suggesting stringent social-distancing measures have proved effective. Strict containment measures also appeared to be helping to curb the spread in Europe’s worst-hit countries.

Bruce Pang, head of macro and strategy research at China Renaissance Securities, said investor sentiment was recovering. “People are trying to identify risks and opportunities now. China’s case shows when new infections peaked out, the market would bottom out. And this is what global investors” now expect, he said.

Mr. Pang said China’s example showed the new coronavirus and measures to contain it would lead to slower growth, rising unemployment, sluggish demand, disrupted supply chains and more defaults. But investors think some of these risks have now been partly priced into global stocks, he said.

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Japan’s Nikkei 225 rose 2% on Tuesday. By early afternoon, South Korea’s Kospi Composite had gained 1.6%. Both indexes were building on larger rallies from Monday.

China’s benchmark Shanghai Composite rose 1.7%. It was closed Monday for a holiday. Hong Kong’s Hang Seng Index added 0.6%.

Australia’s benchmark S&P/ASX 200 gave up early gains to fall 1.1%. The Reserve Bank of Australia left interest rates unchanged Tuesday, and warned the economy would be hit hard by the pandemic in the second quarter.

E-mini S&P 500 futures seesawed between small gains and losses. The yield on the 10-year U.S. Treasury note rose to 0.69%, up from 0.675% on Monday. Yields move in the opposite direction to bond prices.

Paul Hsiao, an economist at PineBridge Investments, said the spread of the virus in the U.S. was a crucial variable for investors, with more than a quarter of global cases now there. He said investors would focus on the effectiveness of health-care policy, as well as fiscal and monetary responses.

However, he said markets would remain vulnerable, partly because it would take time for stimulus payments to reach households and businesses, and because there is a risk of infections rising in rural areas, which could then lead to a resurgence in cities.

Global markets recorded broad gains on Monday. In the U.S., some parts of the debt markets are functioning again, supported by the Federal Reserve, and corporations, including ones with lower credit ratings, are issuing bonds again.

Separately on Monday, the Federal Reserve said it would create a loan program to support small businesses, as part of the government’s $2.2 trillion economic relief package.




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