(C) Reuters. Man wearing a face mask is seen inside the Shanghai Stock Exchange building, as the country is hit by a novel coronavirus outbreak, at the Pudong financial district in Shanghai
By Marc Jones
LONDON (Reuters) – World stock markets made a super-charged sprint towards a second straight week of gains on Friday after President Donald Trump laid out plans to gradually reopen the coronavirus-hit U.S. economy following similar moves elsewhere.
The bulls were back in business, with reports that patients with severe COVID-19 symptoms had responded positively to a drug made by U.S. company Gilead Sciences (O:GILD) giving traders an extra excuse to brush off a widely expected slump in Chinese GDP data.
Europe’s main markets (FTSE) (GDAXI) and Wall Street futures rose more than 3%, putting the pan-regional STOXX 600 (STOXX) up nearly 8% over the last two weeks and MSCI’s 49-country world index <.miwd00000pus.> 23% off last month’s four-year lows. </.miwd00000pus.>
“The market continues to look through terrible data… on anticipation of economies reopening,” said Steen Jakobsen, Chief Investment Officer at Saxo Bank. “And hopes that a new drug treatment will help lift longer-term uncertainty about the COVID-19 pandemic.”
Nearly 150,000 people have now died from the disease, while Friday’s data from China had shown the world’s second-largest economy had contracted for the first time since recognised records began in 1992.
Gross domestic product (GDP) shrank 6.8% in the quarter year-on-year, slightly more than expected, and 9.8% from the previous quarter. Chinese retail sales also fell more than expected in March, but industrial output dipped only slightly, suggesting manufacturing may be recovering more quickly.
Asia had had a strong session. Tokyo’s Nikkei <.225> and Seoul’s KOPSI (KS11) both closed up over 3% and industrial metal copper, seen as something of a bellwether of global economic health, was up nearly 4% for the week. </.225>
Investors are now looking at how the lockdowns that have caused the economic numbers to crash are being gradually lifted.
Following plans announced by China and Germany, Italy, Spain and some other parts of Europe this week, Trump laid out guidelines on Thursday for U.S. states to emerge from shutdowns in a staggered, three-stage approach.
“We are not opening all at once, but one careful step at a time,” Trump told reporters at the White House.
The dollar edged up to a 10-day high on the euro. Gilead Sciences’ (O:GILD) shares surged almost 12% in premarket Wall Street trading meanwhile following a report that partial data on its experimental drug remdesivir showed it might help patients with severe virus symptoms.
Graphic – World stocks shaking off the virus?: https://fingfx.thomsonreuters.com/gfx/mkt/dgkpleqyvbx/Pasted%20image%201587123642847.png
There was still plenty of gloomy news to navigate, however.
Credit rating firm S&P Global downgraded another clutch of countries hit by the coronavirus and warned that even triple-A and other top-rated nations could be cut depending on how they manage the longer-term consequences of the pandemic.
Back in Europe though, Italy’s government bonds, which have been under pressure as the country’s virus difficulties push its debt-to-GDP ratio towards 150%, rallied again as France expressed support for joint euro zone debt issuance.
European countries have “no choice” but to set up a fund that “could issue common debt with a common guarantee”, French President Emmanuel Macron told the Financial Times on Thursday. Failure to do so would lead to populists winning elections in Italy, Spain, and possibly France, he also warned.
Yields on ultra-safe 10-year U.S. Treasuries (US10YT=RR) and German Bunds rose slightly, while Treasury futures (TYc1) and the dollar rose slightly as investors returned to a cautious view about the economic impact of the pandemic and lockdown measures. The safe-haven yen regained some lost ground.
Spot gold fell 1.5% to $1,690 per ounce too and with investors looking to take on more risk, copper’s jump put it on track for its best week since February 2019.
No such luck for battered oil markets, however.
U.S. crude futures (CLc1) slumped as much as 8% to an 18-year low after OPEC lowered its global demand forecast on Thursday.
Brent (LCOc1) was whiplashed too, swinging back under $28 a barrel having been up nearly 3% only to then stage another fight back.
OPEC now sees a contraction of global demand of 6.9 million barrels per day (bpd) this year due to the coronavirus outbreak.
“Downward risks remain significant, suggesting the possibility of further adjustments, especially in the second quarter,” OPEC said of the demand forecast.
Graphic – China GDP contributions: https://fingfx.thomsonreuters.com/gfx/mkt/12/8043/7974/Pasted%20Image.jpg