Stock markets rise despite recession and $2trn stimulus woes

Stock markets are staging a rally despite growing evidence of a deep recession ahead and delays to Donald Trump’s planned $2trn (£1.7trn) stimulus package for the world’s largest economy.

Global indices have lost, on average, almost a third of their values in just the past month as investors have reacted to the spread of COVID-19 and the speed by which it has forced everyday life to be closed down.

Despite a renewed wobble in the US and Europe on Monday, Asian markets reacted positively on Tuesday to moves by the US central bank to bolster asset purchases – bond-buying – by an unlimited amount to support market functionality.

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The bold package of measures helped the Nikkei in Tokyo jump by 7% to record its biggest daily increase in more than four years.

In Europe, the FTSE 100 opened 4% higher – recovering its losses of the previous day – while the CAC in Paris and Germany’s DAX also ticked up by 4% and 6% respectively.

The Dow Jones Industrial Average on Wall Street was tipped to open almost 5% up.

Values were not damaged despite closely-watched indicators of economic activity showing record monthly slumps for both the UK and eurozone.

The flash estimate Purchasing Managers’ Index (PMI) figures for March scored UK output levels at 37.1 – with a figure below 50 indicating contraction. It had stood at 53 in February.

A separate report covering the eurozone charted an “unprecedented” collapse – the output figure coming in at 31.4.

Chris Williamson, chief business economist at IHS Markit which helps compile the PMI figures, said: “The surveys highlight how the COVID-19 outbreak has already dealt the UK economy an initial blow even greater than that seen at the height of the global financial crisis.”

He added: “A recession of a scale we have not seen in modern history is looking increasingly likely.”

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Market falls of recent weeks have stuttered as a growing number of central banks and governments, including those in the UK, have announced action to mitigate the effects of virus disruption on markets, businesses and workers.

Shopping centre in Manchester is deserted shortly before coronavirus lockdown announcement from prime minister

Shopping centre deserted before lockdown announced

A notable exception, as far as stimulus is concerned, is the United States where the President is battling Democrats in a bid to get his programme agreed by Congress.

Commenting on the financial market priority, James Knightley of ING said in a report: “The pressure is now on Congress to get its act together and provide the support that the Fed cannot do – helping the vulnerable people who face the biggest health and economic consequences.”

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It is feared that deep political rivalries, in the wake of the failed impeachment process against Mr Trump, may be hampering negotiations.

The package, as it stands, would send cheques to US households and offer support for small businesses and the hard-hit travel industry.

But Democrats, who argue it favours companies too heavily at the expense of workers and public health, blocked a vote to advance the measures late on Monday.

Ahead of the market open in London, there was another deluge of listed companies reporting on their status as non-essential services closed their doors to customers.

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Mulberry, the leather goods retailer, confirmed it was among chains to have temporarily shut down stores while warning investors that it now expected to report a small loss for the second half of its financial year to 28 March.

It blamed a recent slump in trading, particularly in the UK.

Banking group Santander said its chairman and chief executive would be taking cuts of 50% to their total pay packages while announcing a fund in support of medical equipment to aid coronavirus patients.

Sports Direct, which had initially indicated that its stores would remain open despite the lockdown of the high street, later u-turned in a “clarification” to say it would comply with the order.

Rival JD Sports, which has closed all its UK stores, said it was unable to give guidance on its financial year and delayed the publication of its results for the year to 1 February.