Global stocks surged on Monday after New York and some of the hardest-hit countries in Europe reported a dip in the number of COVID-19 related deaths, adding to recent optimism that the worst of the virus-driven stock market selloff may be over.
The Stoxx Europe 600 index, which tracks stocks in 17 European countries, jumped 3.7 per cent. The index has risen 14.3 per cent from its recent low two weeks ago.
The S&P 500 rose 7 per cent, marking its biggest upward move since March 24 and putting its total gains since hitting an intraday low on March 23 at 21.5 per cent.
The moves included a 19.1 per cent gain by hotel company Marriott International Inc. and a 11.5 per cent gain from payments giant Visa Inc.
Canada’s S&P/TSX Composite Index rose 5.1 per cent in a remarkably broad rally that included energy stocks (even though the price of oil fell sharply) and gold producers (even though gold is widely seen as a haven investment).
The rallies follow indications that the novel coronavirus pandemic, which has locked down much of the global economy and led to an unprecedented number of layoffs, may have plateaued in Italy, France and Spain, turning investors’ attention from lockdowns to recovery.
Even New York state, the world’s most recent hotspot for COVID-19, reported fewer than 600 deaths from the disease over each of the past two days, below the peak of 630 deaths on Saturday, adding to optimism that the outbreak may be levelling off.
“While it is too soon to know for sure if the pandemic has reached an inflection point, this is certainly encouraging – we have argued for a while that stock markets will experience a sustained rebound only when the spread of the virus slows around the world,” Simona Gambarini, a markets economist at Capital Economics, said in a note.
Austria is now considering easing its lockdown restrictions over the coming weeks, making it potentially the first European country to do so.
The pandemic has closed businesses and factories, sending U.S. initial jobless claims up by 6.6 million in the final week of March. Economists estimate that another 5.7 million Americans filed claims last week, adding to expectations that economic activity will suffer its biggest downturn since the Great Depression.
Companies are also being hit as sales plummet and profits disapppear.
Montreal-based CAE Inc., which makes flight simulators, on Monday suspended its quarterly dividend and announced temporary layoffs that affect nearly 25 per cent of its workforce amid what the company called an “unprecedented disruption of the global air transportation system.”
Yet CAE shares also surged, rising 5.9 per cent, suggesting that investors may now be shifting their focus to better days ahead.
“These measures should help CAE protect its financial flexibility to face this crisis,” Benoit Poirier, an analyst at Desjardin Securities, said in a note.
He added: “CAE remains a quality name to own for the next upcycle, in our view.”
Apart from some encouraging developments related to the fight against COVD-19, Japan announced economic stimulus measures valued at 108 trillion yen ($1.4-trillion), adding to the enormous level of financial assistance from governments and central banks as they try to lessen the economic damage.
The U.S. Federal Reserve said it would backstop bank loans to small businesses.
As well, investors learned that Saudi Arabia’s Public Investment Fund has taken an 8.2 per cent stake in Carnival Corp., the cruise line operator whose shares had fallen as much as 85 per cent as travel ground to a halt, suggesting that some institutional investors are now positioning themselves for a return to normal.
Carnival shares jumped 21.3 per cent.
The price of crude oil fell though, as a much-anticipated meeting between Saudi Arabia and Russia to discuss oil production levels on Monday was postponed until Thursday. West Texas Intermediate oil, a U.S. benchmark, fell 6.9 per cent to US$26.39 per barrel.
Canadian energy stocks joined the rally, though. Suncor Energy Inc. rose 4.2 per cent and Canadian Natural Resources rose 1.5 per cent.
RBC Dominion Securities pointed out that corporate insiders in Canada’s exploration and production energy companies have ramped up their buying activity over the past month.
“While it is difficult to ‘call the bottom’, this suggests a consistent internal corporate view that these stocks are undervalued and current market dynamics will normalize over time,” RBC analysts said in a note.
Despite Monday’s gains, the S&P 500 is still down 21.5 per cent from its record high in February. The TSX is down 24.4 per cent from its high.
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David Berman