Via Financial Times

The rebound in global stocks continued in Asia following sharp gains on Wall Street, as new signs of stimulus measures in response to the coronavirus outbreak buoyed investors.

On Thursday China’s CSI 300 index of Shanghai- and Shenzhen-listed shares added 2.2 per cent, while Hong Kong’s Hang Seng gained 1.9 per cent. Australia’s S&P/ASX 200, which fell sharply in the previous session, rose 1.1 per cent. Japan’s Topix was 0.9 per cent higher.

The CSI 300 is the world’s best performing major stock market this year, up nearly 3 per cent, as most other big global indices languish in the red. 

Overnight US stocks surged after the House of Representatives approved an $8bn spending package intended to combat the spread of Covid-19, including funds for protective equipment, testing and surveillance. 

The S&P 500, which closed up 4.2 per cent, was also boosted by US presidential candidate Joe Biden’s strong performance in the Democratic party’s primaries. 

Investors, rattled by a huge sell-off in global stocks last week, have been seeking hints of new stimulus packages in the wake of the US central bank’s emergency rate cut on Tuesday. 

The IMF on Wednesday unveiled a $50bn package of emergency financing for countries stricken by the virus. Meanwhile, Canada’s central bank reduced its benchmark rate by 0.5 percentage points. 

Traders are now looking to how policymakers in China, where the virus originated, respond to easing elsewhere. But analysts at Nomura said investors may be expecting too much. 

“Because of the unique nature of the Covid-19 shock and limited policy space, we believe the scale of the demand stimulus package will be smaller and more concentrated in big cities” compared to previous packages, the analysts wrote. 

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Analysts also cautioned that China was not out of the woods in terms of the outbreak, even though official numbers appeared to show the number of new Covid-19 cases levelling off. Robert Carnell, head of research for Asia Pacific at ING, pointed to risks from Chinese returning to work and cases of the virus imported from other countries.

“Any of these, if not controlled properly, could result in another peak of Covid-19 in China and could move the market negatively,” he said.

Those concerns did not appear to immediately register on investors’ radars. Oil prices shook off the previous session’s losses, with international crude marker Brent rising 1.6 per cent to $51.95 a barrel. US marker West Texas Intermediate added 1.4 per cent to $47.43.

Sovereign bond yields, which rise as bond prices fall, peeled back. Yields on 10-year Australian government bonds gained 6 basis points to 0.775 per cent, while those on the equivalent sovereign Chinese notes climbed 3bp to 2.680 per cent. 

The 10-year US Treasury yield dipped 5bp to 1.007 per cent, but remained above Wednesday’s lows. S&P 500 futures were pointing to losses of 0.6 per cent when Wall Street begins trading on Thursday.

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