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U.S. Stocks Surge, Treasuries Sink on Economy Bets

Wednesday 5th February 2020

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U.S. stocks rallied, while Treasuries plunged as investors speculated the global economy will withstand any impact from the still-spreading coronavirus after China’s market sell-off eased.

The S&P 500 headed for its best surge since August and the Nasdaq 100 Index hit an all-time high as investors piled back into risk assets after last week’s rout. European and emerging-market shares rallied. Shanghai stocks rebounded from a record $720 billion wipeout. Treasuries tumbled with gold. Copper in London halted a 14-day slide. Oil bucked the trend, erasing gains that topped 2%. In company news, Tesla Inc. extended its torrid run.

Investors appear to be taking some comfort from the measures Beijing has taken to contain the virus to Hubei province and to support economic growth. Still, travel restrictions continue and business shut-downs mount, with Macau closing casinos for another two weeks. Bulls have focused on strong corporate earnings and assurances of support from central banks. Meanwhile, traders are also waiting for the outcome of the Iowa Caucuses, as the 2020 Democratic presidential race kicks off. Problems with the reporting process have delayed the results.

“The lesson of today’s stock market rally is that while the coronavirus is a risk, it is not a material risk to the economic outlook which backstops corporate earnings always,” said Chris Rupkey, chief financial economist for MUFG Union Bank. “Coronavirus doesn’t increase the odds of a U.S. recession this year.”

(Bloomberg)



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