A global stocks rally petered out Wednesday as Europe took up the baton, despite US lawmakers agreeing a mammoth stimulus package to help the world’s biggest economy resist effects of the COVID-19 pandemic.
After huge gains for equities Tuesday, which continued into Wednesday with Tokyo soaring and European indices jumping at the open, London lost some of its gains and Frankfurt was in the red nearing the half-way stage.
Elsewhere, the dollar was lower against main rivals and oil prices retreated.
“The stimulus is now by and large in place, the question is whether it’s enough for the markets or whether the expected spike in cases and deaths in the US and Europe, combined with the emerging picture of the economic damage, means we need to take another leg lower before the bottom is found,” said Neil Wilson, chief market analyst at trading group Markets.Com.
While COVID-19 continues to spread, traders have a rare semblance of optimism after weeks of carnage across global markets, with eyes fixed on Washington where lawmakers thrashed out an emergency bill worth as much as $2 trillion — around 10 percent of US gross domestic product. “At last, we have a deal,” Senate Majority Leader Mitch McConnell said, calling it a “wartime level of investment into our nation”. “We have a bipartisan agreement on the largest rescue package in American history,” top Senate Democrat Chuck Schumer said shortly after McConnell spoke.
“So many people are being put out of work through no fault of their own. They don’t know what their future is going to be like, how are they going to pay the bills,” Schumer noted. “Well, we come to their rescue.”
The measure will put cash directly into the hands of Americans, provides grants to small businesses and hundreds of billions of dollars in loans for corporations including embattled airlines, while expanding unemployment benefits.
The prospect of a massive spending splurge, combined with the Federal Reserve’s pledge to essentially print as much cash is needed, sent Wall Street into overdrive Tuesday, with the Dow seeing its biggest rise since 1933, while the S&P 500 enjoyed its best day in more than a decade.