NEW YORK (Reuters) – The dollar and global stock markets rose on Wednesday as investors were cheered by Joe Biden’s strong performance in the US Democratic presidential primaries, despite a weakening coronavirus epidemic kept investors in suspense, with falling bond yields.
FILE PHOTO: The offices of the London Stock Exchange Group are seen in the city of London, in Great Britain, on December 29, 2017. REUTERS / Toby Melville / File Photo
Former Vice President Biden, seen as less likely to raise taxes and impose new regulations than his rival Bernie Sanders, won victories in the South, Midwest and New England on the biggest day of vote for the Democratic presidential nomination campaign.
This helped the US stock markets rebound after a drop on Tuesday, after investors felt that the surprise drop in interest rates by 50 basis points from the US Federal Reserve was not an inadequate response to an epidemic that had so far killed more than 3,000 people worldwide and threatened to slow the global economy. growth.
Bonds held up after Tuesday’s rate cut.
The Fed’s first off-schedule move since the 2008 financial crisis came with comments highlighting both the magnitude of the challenge and the limits of monetary policy, but Biden’s success has offered respite to investors.
“Seeing Biden emerge as the forerunner sets the stage for a runoff in the fall that pits two people who are not anti-business,” said Larry Hatheway, co-founder of research firm Jackson Hole Economics, making reference to President Donald Trump.
“Sanders’ concern would have been the regulation of large swathes of the American industry,” he said.
The rebound has offered investors the opportunity to reorganize portfolios to adapt to current market conditions while markets are higher, said Hatheway, adding that he expects to provide only one temporary respite.
“I don’t think the market has bottomed out. I think the market will probably drop another 5% to 10%,” he said. “We’re going to have to go down because you have a marked slowdown in activity which will probably last throughout the first semester. ”
The MSCI World Equity Index .MIWD00000PUS gained 1.01% and emerging market stocks rose 0.73%.
The pan-European STOXX 600 index rose 1.00% and Wall Street rose.
The Dow Jones Industrial Average .DJI rose 471.67 points, or 1.82%, to 26,389.08. The S&P 500 .SPX gained 45.24 points, or 1.51%, to 3,048.61 and the Nasdaq Composite .IXIC added 120.03 points, or 1.38%, to 8,804.12.
The Euro STOXX 600 gained 1.0%, on track for the third consecutive day of gains.
The spread of the virus has continued to impact businesses and financial institutions around the world. Lufthansa has said it will eliminate 150 planes if its total fleet of around 770 due to the virus and General Electric has warned that it would take a hit from $ 300 million to $ 500 million.
Blackstone private equity firm chief executive Stephen Schwarzman said it was “not clear” whether the Fed’s cut would restore confidence.
Some viewed the Fed’s extraordinary decision as a move to act quickly and quickly, as it expected further economic damage from the spread of the coronavirus.
“They have indicated their willingness to take further action, which is why we are witnessing a new bond rally,” said Tim Drayson, chief economic officer at Legal & General Investment Management.
The benchmark 10-year US Treasuries index gives US10YT = RR, which drops when prices rise, staying below 1% – not far from overnight low of 0.9060%. Yield fell for ten consecutive days, its longest decline in at least a generation.
10-year benchmarks US10YT = RR increased 17/32 for the last time with a yield of 0.9618%. On Wednesday, eurozone bond yields also held near their record low, the 10-year German Bund yield DE10YT = RR around -0.64%, near the six-month lows set on Monday.
With safe haven currencies in demand, the dollar has recovered from almost five-month lows against the yen JPY = EBS and fell to its lowest against the Swiss franc CHF = EBS in almost two years. It remained stable against a basket of six main currencies = USD.
The dollar = USD index rose 0.332%, the euro EUR = down 0.36% to $ 1.1131.
The Japanese yen weakened by 0.20% against the greenback to 107.37 for one dollar.
Korean stocks .KS11 gained 2% on a government stimulus package of $ 9.8 billion to mitigate the impact of coronaviruses.
(Graphic: Coronavirus hits financial markets – here)
Additional reports by Tom Wilson and Marc Jones in London, Scott Murdoch in Hong Kong and Tom Westbrook in Singapore; Editing by Bernadette Baum