Global stocks rose Monday, with investors anticipating that stimulus measures and the easing of coronavirus-lockdown measures in the U.S. and Europe may help kick-start economic activity.
Futures tied to the Dow Jones Industrial Average advanced 0.9%. Last week, the benchmark for U.S. blue-chip stocks posted modest losses, dropping 1.9% after a massive rally from late March to mid-April.
Japan’s Nikkei 225 stock index ended the day up 2.7%. The Bank of Japan scrapped its target for government-bond purchases and said it would nearly triple its holdings of corporate debt to aid fundraising by companies affected by the coronavirus pandemic.
European markets climbed as countries including Italy and Spain signaled that they may loosen restrictions in the coming weeks. The pan-continental Stoxx Europe 600 gauge rose 1.7%.
Italy announced a timetable for reopening its economy and restoring daily life beginning on May 4, but warned that a resurgence in cases could lead to a return of restrictions. Spain allowed children to leave their homes after six weeks under one of the strictest lockdowns in the world.
In the U.S., some states allowed retailers, salons and other businesses to reopen over the weekend as new infections appeared to slow.
“We don’t yet know the full scale and the pace of lockdowns being eased, but it’s important for confidence,” said Edward Park, deputy chief investment officer at Brooks Macdonald. “Suggestions that factories will restart sooner rather than later suggests that the pressure on economic output in the data we’ve seen will be a shorter-lived phenomenon.”
Concerns about sovereign debt from Europe’s most debt-laden countries also showed signs of easing. Italian, Spanish and Greek bonds rallied after S&P Global Ratings on Friday held off on downgrading Italy’s credit rating. The yield on Italy’s 10-year bond fell to 1.754% Monday, from 1.903% Friday.
“Markets at the tail end of last week were fixated on European political risk, and a run on debt markets triggered by a downgrade for Italy,” said Mr. Park. “The lack of a downgrade offers some breathing space.”
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Oil prices dropped sharply as energy markets remain volatile at the start of a week that will test the world’s ability to house a glut of crude. West Texas Intermediate futures, considered the benchmark for U.S. crude prices, fell over 24% to $12.59 a barrel. Brent crude, the global benchmark, fell 5.3%.
The yield on the benchmark 10-year U.S. Treasury rose to 0.630%, from 0.594% Friday.
Investors will also be closely focused on the outcome from the U.S. Federal Reserve and the European Central Bank’s meetings this week. Recent economic data and forecasts from many countries have been weak, prompting policy makers to take unprecedented steps and allocate huge sums to support businesses and individuals whose finances have taken a hit.
“Normally when you have a recession, there are a number of factors that are reining in credit and stimulus and that’s not the case here,” said Mark Haefele, chief investment officer at UBS Global Wealth Management.
Later in the week, a flood of U.S. companies—including Amazon.com, Apple and Facebook— are scheduled to report first quarter earnings. They are likely to provide insights on how leaders of the biggest American businesses view prospects for the rest of the year. But the pandemic has made earnings forecasts even less reliable than normal, analysts and investors said.
“Most investors are looking through the earnings reports as somewhat meaningless because we’ve never had this mix of fall-off in demand and central bank, government stimulus support before,” Mr. Haefele said.
Among major European equities, Deutsche Bank AG was the best performer. The stock rose over 10% after the German bank said late Sunday that it will beat analyst expectations and report a first-quarter profit. Higher revenue and lower expenses have helped it offset provisions for credit losses triggered by the coronavirus outbreak.
Across Asia, South Korea’s Kospi Composite advanced 1.8% while Hong Kong’s Hang Seng Index gained 1.9%. The stocks benchmark in Australia climbed around 1.5%.
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China’s statistics bureau Monday released data showing that industrial companies’ profits in March were down 34.9% from a year earlier, a slight improvement from the 38.3% pace of decline in January-February. The country last month began reopening some industrial hubs after closing most factories and companies to curb the coronavirus’s spread. The Shanghai Composite Index closed 0.3% higher.
Central banks’ stimulus policies and other government measures to subsidize wages are all helping to buoy markets and asset prices, said Iris Pang, chief economist for Greater China at ING Bank NV in Hong Kong. “They will take a while to reach the real economy,” she said, adding that the path to increasing consumption is unlikely to be smooth.