By Anna Hirtenstein and Chong Koh Ping
Stocks rose Thursday despite U.S. unemployment claims soaring, offering fresh cues on the economic disruption caused by the coronavirus pandemic amid a shutdown of wide swaths of the country.
The S&P 500 rose 1.8% after futures tied to the index wavered between gains and losses, signaling a potential end to two days of gains in U.S. stocks. The Dow Jones Industrial Average jumped 448 points and the Nasdaq Composite Index rose 1.7%. The pan-continental Stoxx Europe 600 declined 1.5%.
The outbreak continues to spread in the U.S., where more than 60,000 people have been infected, leaving lawmakers struggling with the economic consequences of the pandemic. The country now trails only China and Italy in the number of confirmed coronavirus cases, even as emergency measures to contain the outbreak has stalled business activity.
"The reality is that there's still a lot of uncertainty to the degree to which the virus disrupts economic activity. Markets are digesting that, " said Anthony Rayner, a multiasset fund manager at Premier Miton. "There's almost a point where the more policy makers do, whether it's monetary or fiscal, the more people panic in a way."
A $2 trillion emergency relief package approved by the U.S. Senate on Wednesday is expected to help stabilize the economy, but may not enough to bring it back to health. A record 3.28 million workers applied for unemployment benefits last week as the new coronavirus hit the economy, ending a decadelong job expansion.
The markets' muted reaction to the unemployment claims suggests that investors are shifting out of crisis mode, according to Sebastien Galy, a macro strategist at Nordea Asset Management.
Federal Reserve Chairman Jerome Powell said Thursday morning that he expected economic activity to decline "pretty substantially" in the second quarter. The central bank is taking unprecedented action to help ensure economic activity can resume as soon as the coronavirus pandemic is under control, he added in a rare television interview on NBC's Today show.
The yield on the benchmark 10-year U.S. Treasury retreated to 0.792%, from 0.854% Wednesday.
Yields on the safest, short-term Treasurys settled into negative territory for the first time in more than four years, a sign that investors are still clamoring for cash and safe dollar assets.
The 1-month Treasury bill yield closed at minus 0.041% and the 3-month closed at minus 0.046% Wednesday, the first time they ended the day below 0% since late 2015, according to Tradeweb. They edged out of negative territory early Thursday, with the 3-month Treasury at 0.005%.
In Europe, government bonds from debt-laden nations in the southern part of the region continued to rally Thursday after the European Central Bank began new bond purchases and signaled it would aggressively support Italy and other troubled eurozone nations.
The ECB late Wednesday "broke new ground" by giving itself significantly more flexibility on its additional EUR750 billion ($821 billion) bond-purchase program, according to Florian Hense, an economist at Berenberg Bank. Policy makers waived the limits on the share of a member state's outstanding bonds that it can buy under this particular ECB mandate, and allowed the purchase of debt with shorter maturities as well as Greek sovereign debt, Mr. Hense wrote in a note.
The yield on Greece's 10-year bonds, which had been roiled in recent weeks as investors shunned assets considered to be too risky, fell to 1.701%, from 2.477% on Wednesday. It had climbed to over 4% last week. Italy, Spain and Portugal also saw bond prices climb, leading to lower yields.
Meanwhile, Bank of England officials said they expect "a sharp reduction in activity" as a result of the pandemic and the measures the government has taken to contain it. The central bank kept policy on hold Thursday after an emergency cut to interest rates last week, and said it is prepared to increase the size of its bond-buying program if needed to support the U.K. economy during the coronavirus crisis.
In commodity markets, crude-oil prices fell, pushed lower by evidence that the pandemic is leading to an unprecedented decline in energy demand. Global oil consumption will fall by 10.5 million barrels a day in March, and by 18.7 million barrels a day in April, compared with a year earlier, analysts at Goldman Sachs Group said. Refineries will run out of space to store refined products within weeks, the bank added, at which point refineries will cut the amount of crude oil they buy. Brent-crude futures declined 1.7%.
Most major stock markets in the Asia-Pacific region closed lower. Japan's Nikkei 225 lost 4.5%. Singapore's FTSE Straits Times Index shed 1% after the country forecast that the economy could contract by up to 4% in 2020 in its first full-year recession since 2001.
Volatile stock markets reflect investors grappling with a lot of conflicting information, said Vikas Pershad, portfolio manager at M&G Investments.
"The markets are not broken," Mr. Pershad said. "What we're seeing is a very large disconnect between the present world and the future that they're pricing in."
The bill for the stimulus package approved by the Senate will now move to the House as Congress seeks to give American families and businesses a financial shield against the ravages of the pandemic.
"We know that governments across the board, including the U.S. now, have finally come around to supporting the real economy, individuals, corporations, with fairly large packages," said Peter Schaffrik, a global macro strategist at RBC Capital Markets. "The trouble is that we have no idea how long the entire virus lockdown situation might last."
The dollar edged down, with the ICE Dollar Index declining almost 1%, signaling that the Federal Reserve's moves to improve liquidity in currency markets is helping meet the demand and ease strains. The currency has retreated close to 2% this week as supply pressures have eased.
"The Fed has done a good job of getting us back from a bad place," said Kit Juckes, a currencies strategist at Société Générale. "Powell has reliquified currency markets, the plumbing job is going as well as could be expected."
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