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Thursday, February 2, 2023

European markets lower following stimulus surge on Wall Street

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Shares have fallen in Europe after a mixed day in Asia, where Tokyo’s Nikkei 225 jumped while Australia’s benchmark sank 5%.

US futures were also lower after major Wall Street indexes jumped more than 6% overnight, bringing the S&P 500 up 17% since Monday as a massive coronavirus relief package for the US economy headed for congressional approval on Friday.

Investors appeared to shrug off miserable news on unemployment following a report that nearly 3.3 million Americans applied for unemployment benefits last week, shattering the prior record set in 1982, as lay-offs and business shutdowns sweep across the country.

Germany’s DAX fell 1.2% to 9,880.44 while the CAC 40 in Paris gave up 2% to 4,453.30. Britain’s FTSE 100 sank 4% to 5,581.51. The future contract for the S&P 500 fell 1.6% to 2,567.60. The future for the Dow industrials lost 1.5% to 22,017.00.

Craig Erlam of Oanda said: “Rallies don’t last forever and clearly investors are happy to call time on this one as we head into another uncertain weekend.

“We may have had a good run this week, but the weekend can feel like a long time at moments like this and the numbers we’re getting from the US, which now has more cases than China or Italy, are getting uglier by the day.”

Thursday’s bad news on unemployment was expected and followed earlier gains after US congress and the Federal Reserve promised an astonishing amount of aid for the economy and markets, hoping to support them as the outbreak causes more businesses to shut down by the day.

The 2.2 trillion dollar (£1.8 trillion) coronavirus relief plan due to be voted on by the House of Representatives on Friday includes direct payments to US households and aid to hard-hit industries.

The prospect of a big financial shot in the arm for businesses and households helped offset some of the concerns about the steep job losses the economy is beginning to see due to the coronavirus. But barring unexpected good news, it is a matter of time before this stimulus-fuelled rally fades.

However, Asian markets mostly rose as governments tightened controls on businesses and travel, seeking to contain the pandemic.

Japan’s Nikkei 225 index surged 3.9% to 19,389.43, while South Korea’s Kospi jumped 1.9% to 1,717.73. The Hang Seng in Hong Kong advanced 0.6% to 23,484.28, while the Shanghai Composite index edged 0.3% higher to 2,772.20. Shares fell in Taiwan but rose in south-east Asia.

India’s Sensex rebounded, gaining 0.7% to 30,148.36 after the central bank slashed its key lending rate to a decade-low 4.4% from 5.15% to help the economy weather a lockdown aimed at beating the outbreak in the world’s second most populous country.

Sydney’s S&P/ASX 200 slipped to 4,842.40.

So far, though, there has no been reassurance on the spread of the pandemic.

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