Global stocks regained ground Tuesday on mounting speculation that policy makers are likely to offer stimulus to economic growth around the world as the coronavirus outbreak curtails business activity and travel.
Futures tied to the Dow Jones Industrial Average climbed 0.7%. The Stoxx Europe 600 gauge gained 2.4%, while China’s Shanghai Composite closed 0.7% higher.
The rally came after hopes for a wave of stimulus on Monday drove the Dow up 5.1%, its biggest gain in more than a decade.
The European Central Bank stands ready to take steps to safeguard the economy, President Christine Lagarde said Monday evening, echoing several central bankers around the world including Federal Reserve Chairman Jerome Powell. Finance ministers from the Group of Seven countries are due to have a telephone meeting on Tuesday to coordinate their response to the coronavirus.
“This talk of concerted and coordinated action from central banks has had a reaction, but what form that takes, time will tell,” said Russ Mould, investment director at AJ Bell. “The coronavirus has hit at a time of high greed and little fear, a period of lofty and complacent levels of valuation. Cutting interest rates is not going to make someone take a flight to Italy if they’re too scared to do it.”
U.S. airlines, which had suffered along with other global travel and tourism stocks in recent days, rose ahead of the New York opening bell. United Airlines Holdings rose 4.3% in premarket trading, while Delta Air Lines climbed 4.7% and American Airlines Group gained 4%.
In Europe too, airlines were among the best-performing stocks Tuesday. Deutsche Lufthansa advanced 8.5%, while British Airways owner International Consolidated Airlines Group rose 6.6%.
Most commodity markets also saw a rally on Tuesday. Brent crude, the global benchmark for oil prices, rose 2.5%, while gold advanced 0.6%. In contrast, copper retreated 0.4%.
The equity-market performance was more muted in Asia, as a strong rally faded through the course of the day. Hong Kong’s Hang Seng Index closed mostly flat, while Japan’s Nikkei 225 dropped 1.2%.
In bond markets, the yield on the benchmark 10-year U.S. Treasury rose to 1.139%, from 1.085% Monday.
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Bond futures are pricing in a 100% chance of interest rates being 0.5 percentage point lower by the March meeting, and a more than 70% chance that rates will be 0.75 percentage point lower than by April, according to the CME FedWatch tool.
Some analysts and investors questioned how effective monetary policy could be in counteracting the economic effects of a public health crisis.
“Cutting rates helps boost investors’ confidence, but it won’t help sick or quarantined people get back to work,” said Bruce Pang, head of macro and strategy research at China Renaissance Securities (HK) Ltd. Fiscal policy would be more effective than action from central banks, whose results would be indirect and distorted, Mr. Pang said.
Australia’s S&P/ASX 200 was higher Tuesday before the central bank decision on interest rates.
Photo: joel carrett/ShutterstockWrite to Anna Isaac at anna.isaac@wsj.com and Xie Yu at Yu.Xie@wsj.com
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Global Stocks Claw Back More Ground - The Wall Street Journal
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