Stock markets slip as $2trn US stimulus rally falters

A rebound in coronavirus-hit stock market values is slipping despite signs the hotly anticipated $2trn US stimulus package will be formally signed off later on Wednesday.

The Dow Jones Industrial Average had its best session, in percentage terms, since 1933 on Tuesday while the FTSE 100 gained the most in a day for 12 years as evidence mounted a deal had been done pending crucial Congressional votes.

The package, agreed by Senate leaders late on Tuesday, is expected to include direct payments to US households and aid for small businesses, the travel industry, hospitals and local government as the country gradually shuts down to fight COVID-19.

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Political wrangling over the Bill’s contents in the world’s largest economy meant it was the elephant in the room for investors following a slew of economic support from other governments and central banks globally.

Asian stocks followed the US and Europe in making big strides in Wednesday deals – with Japan’s Nikkei rising by 8% while Hong Kong was almost 4% up.

The FTSE in London surged as much as 5% higher but later fell back into the red as volatility returned. It was 1% up by 1130am.

US futures were positive initially but later signalled a lower opening on Wall Street.

Chancellor Rishi Sunak arrives in Downing Street London, ahead of a meeting of the Government's emergency committee Cobra to discuss coronavirus.

Banks are facing pressure from the Chancellor and regulators to maintain lending and not rely purely on Treasury and Bank of England support schemes

Developments in the UK:

  • The big banks have been sent a letter from the Chancellor, governor of the Bank of England and head of the Financial Conduct Authority which urges them to ensure viable businesses ahead of the crisis remain so.
  • Barclays UK said it was to help consumers by automatically waiving interest on overdrafts for personal banking customers from 27 March to the end of April.
  • Chancellor Rishi Sunak has added estate agents, lettings agencies and bingo halls to the retail and hospitality firms exempted from business rates in the current financial year.
  • The Institute for Fiscal Studies has suggested there is scope to help businesses ride out the storm by delaying the introduction of higher minimum wage rates that were due in April, citing improved welfare support on offer.
  • The core measure of inflation fell to 1.7% in February from 1.8% the previous month thanks to falling fuel and computer game prices.

There was also a further steady stream of companies warning of a coronavirus impact in updates to the City on Wednesday morning.

Bicycle-to-car products retailer Halfords said it was planning for a 25% collapse in sales in its next financial year, beginning in April.

It told shareholders the dividend was to be suspended as part of moves to save cash but said it was confident it could operate within its current debt facilities.

Housebuilder Bellway said its half-year dividend was to be delayed and it would suspend purchases of new land.

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As the PM faces pressure to intensify the current lockdown regulations amid anger from builders, the company confirmed it was currently continuing to operate – in line with the guidance – but would close sites by the end of the week amid the need to keep people safe and as building supplies dried up.

Persimmon said it was also starting an “orderly shutdown” of its construction sites.