Wall Street was set to follow European bourses higher, buoyed by signs that the spread of coronavirus was decelerating.
Futures pointed to gains of more than 3 per cent for the S&P 500 when trading begins in New York, building on a 7 per cent rise on Monday — its best day in a fortnight. That would mirror an uptick in European equity markets, where the continent-wide Stoxx 600 is 2.7 per cent at lunchtime.
London’s FTSE 100 was up 3 per cent in early afternoon trade, while the CAC 40 in Paris climbed 2.8 per cent and Frankfurt’s Dax 30 was 3.7 per cent higher.
Investors have been encouraged by signs that sweeping restrictions on movement in the US and Europe have proved effective in slowing the spread of coronavirus.
There were 73,135 cases of Covid-19 confirmed worldwide as of Monday, with the number of new cases across the globe remaining steady for the past two days.
“The near-term improvement in investor sentiment has been mainly driven by building evidence that the lockdown measures are proving effective at slowing the spread of Covid-19,” said Lee Hardman, currency analyst at MUFG.
New case numbers in Italy, Spain, Austria and Germany — on the basis of seven-day rolling averages — have all begun to decline. This has raised hopes that lockdowns will soon be eased, offering some respite to flagging economies. Austria is set to be the first European country to relax strict quarantine measures with the opening of some shops next week.
Analysts at Pantheon Economics expect daily infection numbers to peak in the US and the UK this week. “The underlying trend very clearly is downwards, as it should be some three weeks after California was the first state to issue a shelter-in-place order,” said Ian Shepherdson, chief economist at Pantheon Economics.
In Asia, equity markets climbed for a second day with Hong Kong’s Hang Seng closing up 2.2 per cent while Japan’s Topix ended its session 2 per cent higher.
But Paul Donovan, chief economist at UBS, said the general lack reliable data still makes it difficult to accurately predict the strength of any economic bounce back.
“For the time being markets are likely to be more reactive and sentiment-driven rather than predictive,” he said. “The idea that financial markets are always discounting known information about the future is fine in theory. In practice, in these circumstances, that fine ideal probably does not apply.”
Government bonds slipped as investors moved back into riskier assets. The yield on the US 10-year government bond rose 0.06 percentage points to 0.74 per cent. Yields fall as prices rise.
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Oil prices rose on Tuesday, resuming Monday’s rally on hopes that Saudi Arabia and Russia would reach a deal that would reduce crude output and underpin sliding prices.
G20 oil ministers are due to meet on Friday — the first time the group has met to deal specifically with energy issues — fuelling optimism an agreement can be hammered out to cut output as global oil demand wanes.
Brent crude, the international oil benchmark, was up 2.3 per cent to trade at $33.82 a barrel.