By Lorcan Roche Kelly
Republican and Democrat Senators reached a deal with the White House on a stimulus package that is set to unleash more than $2 trillion in spending and tax breaks to bolster the U.S. economy and fund the effort to combat the coronavirus outbreak. The package includes $500 billion in loan guarantees, $350 billion to aid small businesses and direct payments of $1,200 to people who are not high earners. The bill, which is still being drafted, was described by Senate Democratic leader Chuck Schumer as an “outstanding agreement.” The Senate is expected to vote on it later today, before it goes to the House, and then on to President Donald Trump for his signature.
It is not just the U.S. announcing massive fiscal stimulus: Governments around the world are pumping money into their economies to fight the economic effects of virus shutdowns. Lawmakers in Germany are set to become the latest to step up to the plate as they vote today on a massive 750 billion euros ($812 billion) package of measures which would include new borrowing requirements of 156 billion euros. With much of Europe’s economic activity already grinding to a halt, there are increasing calls from governments in some of the worst-hit countries for a regional response to the outbreak, including the issuance of joint debt by euro-area governments.
In the U.S., the situation in New York seems to be worsening as the city has become a major center of the outbreak. The administration warned that people leaving there should self-isolate for 14 days after arrival in their destination in an attempt to control the spread of the virus. California Governor Gavin Newsom suggested that the state may have to remain in shutdown for “eight to twelve weeks,” distancing himself from President Trump’s comments that the U.S. economy could reopen by Easter. Elsewhere, India entered a three-week lockdown, Singapore tightened measures, and the U.K. announced the closure of Parliament.
Markets add to rally
Yesterday’s surge in U.S. stocks was one for the history books, and all signs point to more gains today. Overnight the MSCI Asia Pacific Index jumped 5.6%, with Japan’s Topix index the best performing major gauge in the region, closing 6.9% higher. In Europe, the Stoxx 600 Index had gained 2.9% by 5:55 a.m. Eastern Time as it failed to hold early-session highs. S&P 500 futures pointed to more green at the open, the 10-year Treasury yield was at 0.861% and gold gave back some of yesterday’s rally.
Durable goods orders published at 8:30 a.m. are unlikely to move markets much as, once again, the numbers will be viewed as too stale to matter by investors. It will be a similar story for house prices data due at 9:00 a.m. Right now, the only piece of economic news markets are interested in is tomorrow’s weekly jobless claims, with economists suggesting the number could be as high as 3 million. The oil market gets an update on U.S. inventories at 10:30 a.m. and Micron Technology Inc. is among the companies reporting earnings.