Stocks advance on central bank hopes; oil rebounds

Bloomberg

The worst stock rout since the global financial crisis showed signs of easing on Monday amid optimism that central banks will help cushion markets from the impact of the coronavirus. Crude oil rebounded.
The Stoxx Europe 600 Index jumped, with 17 of 19 industry sectors in the green, and futures for all three main American indexes advanced in the wake of a rare statement from the Federal Reserve that opened the door to a rate cut based on the “evolving risks” posed by the outbreak. The Bank of Japan hinted at easing, and the Bank of England pledged to “ensure all necessary steps are taken to protect financial and monetary stability.”
Money market traders expect the European Central Bank to ease rates by 10 basis points in April as policy maker Francois Villeroy de Galhau said more could be done if needed. Most European bonds gained, tracking Treasuries as they rallied for an eighth day. The dollar slipped as the euro strengthened.
Investors appear to be encouraged that policy makers will act after fears about the spreading virus drove the S&P 500 Index to its worst week since 2008. Germany’s finance ministry is exploring ways to loosen deficit limits that may pave the way for higher spending to boost Europe’s biggest economy.
“We’ll start to see more rhetoric from governments to address the situation both from a fiscal and central bank easing standpoint,” said Damien Loh, chief investment officer at Ensemble Capital Pte in Singapore. “We might see one leg of risk-off but it feels to me most of the bad news has been priced in.”
The global death toll from the virus has surpassed 3,000, with the number of US cases climbing over the weekend, including the first positive test for a person in New York State, while cases in Italy and South Korea jumped. US President Donald Trump was set to meet with pharmaceutical industry executives at 3 pm Washington time on Monday.
Elsewhere, Australian and New Zealand 10-year bond yields hit fresh record lows. The Mexican peso tumbled about 1% after President Trump said he is considering increased controls on the border since Mexico reported its first coronavirus case.
A key factory gauge on Monday is projected to show that US manufacturing came close to stagnating last month. The ISM purchasing managers index is estimated to fall to 50.5 from 50.9.
The Reserve Bank of Australia sets policy on Tuesday.
US citizens in states including California and Texas will vote on “Super Tuesday” for a Democratic candidate to run against President Donald Trump in November’s election.
The Bank of Canada has a rate decision on Wednesday.
OPEC ministers gather in
Vienna on March 5-6.
The Stoxx Europe 600 Index jumped 1.4% in London. Futures on the S&P 500 Index advanced 1.6%. Nasdaq 100 Index futures climbed 1.8%. The UK’s FTSE 100 Index surged 2.4%. The MSCI Asia Pacific Index increased 0.9%.
The Bloomberg Dollar Spot Index fell 0.2%. The euro climbed 0.4% to $1.1075. The British pound dipped 0.5% to $1.2759. The Japanese yen was little changed at 107.94 per dollar. The South Korean Won strengthened 1.8% to 1,193.57 per dollar.
The yield on 10-year Treasuries decreased five basis points to 1.10%. The yield on two-year Treasuries decreased 15 basis points to 0.76%. Germany’s 10-year yield fell two basis points to – 0.63%. Australia’s 10-year yield declined one basis point to 0.808%.
West Texas Intermediate crude surged 2.9% to $46.04 a barrel. Iron ore surged 6.2% to $87.40 per metric ton.