Markets, oil extend gain due to signs of progress against virus

World stock markets enjoyed a second day of sharp gains on Tuesday as signs of progress against the coronavirus in both Europe and the United States and some more liberal helpings of stimulus kept investors charging back in.

There was an added boost from commodity markets as oil climbed nearly 2.5% on supply cut hopes, while currency markets also came alive as a tumbling dollar sent the euro racing out of a six-session rut of falls.

Equities were where the main action was however. Japan’s Nikkei followed up Wall Street’s 7% surge on Monday [nL1N2BU2BE ]with a 2% jump as its government promised a near $1 trillion stimulus package - equal to a fifth of its GDP.

Europe was in the swing of things too. The pan-European STOXX 600 index climbed roughly 3% as the respective markets in London, Frankfurt, Paris, Milan, and US futures, all bounded higher.

“A day does not a trend make, a week does not a trend make... but we think the market is bottoming out,” said Jeff Mortimer, Director of Investment Strategy at BNY Mellon Wealth Management.

“We are trying to get clients to understand that (in market performance terms) better times ahead can come more quickly then you expected.” Worldwide, the virus has infected more than 1.3 million people and killed over 74,000, and though the numbers are still rising in many highly-populated countries, some tentative improvements have given hope.

In hardest-hit Italy and Spain, authorities have started looking ahead to easing lockdowns after steady falls in fatality rates. In the United States too, the daily number of deaths in the country’s worst-affected area, New York, has also shown signs of steadying.

With market optimism on the rise, the US dollar, which has been soaking up safe-haven flows for weeks, slipped against most major currencies.

The euro shot up 0.8% to $1.0880 to snap a six-day run of falls, the pound climbed despite Britain’s Prime Minister remaining in intensive care due to the virus, and the Australian dollar jumped over 1.5% to its highest in a week.

New Zealand’s dollar rose 1.3% too, while the Japanese yen shook off an early dip to clamber up to 108.92 per US dollar.

“We’ve got a nice decline in volatility across forex and equity markets. We know central banks have done a very good job in alleviating the strain in dollar markets and that’s feeding through,” said Kenneth Broux, FX strategist at Societe Generale.

“We need some time for this to settle... I think what we are seeing is a bit of mean reversion - a correction from exaggerated selling. We are in that process.” OIL UP It wasn’t only oil driving commodities markets higher either, copper punched up to a 3-week high with a 3% gain for industrial metals, while safe-haven gold wilted to $1,655 an troy ounce in the other direction.

Benchmark 10-year US Treasuries and German Bunds continued to lose out too. US yields - which move inverse to price - rose to 0.73% having fallen almost 9 basis points on Monday, and Bund yields were up 6-9 basis points across the curve.

Rating agency Fitch had warned on Monday that it was likely to make some multi-notch cuts to some countries’ credit scores due to the financial pressures heaped on by either tackling the virus, the collapse in oil prices, or both.

The Eurogroup of finance ministers within the single eurozone currency bloc are scheduled to meet later on Tuesday, and analysts expect more joint action to help prop up the economies of member states.

Cyprus, one of the lower-rated countries in the bloc, is marketing a seven-year and 30-year bond issuance. In Asia, Indonesia issued a 50-year bond, the longest ever timeframe in the region.

“Investors have recently been detecting growing public support for the concept of coronabonds in European Commission and ECB circles,” said DZ Bank analyst Daniel Lenz, adding that German ECB Executive Board member Isabel Schnabel was among those who appeared to voice support.

Gold prices fell over 1% on Tuesday, retreating from a near one-month high hit earlier in the session, as signs of slowdown in coronavirus cases in major epicentres boosted equity markets, drawing away some of the bullion’s safe haven appeal.

Spot gold fell 0.6% to $1,651.15 an ounce by 10:24 a.m. EDT (1424 GMT), having earlier touched a near one-month high of $1,671.40. “What we’re seeing in equity markets is more of a stabilization with the peaking (coronavirus) numbers in some US jurisdictions,” said Bart Melek, head of commodity strategies at TD Securities.

“All that really tells us is that there might be an end game to this, but by no means is the world benign and risk friendly”, he said adding that expectations of more stimulus with lower interest rates for longer term will continue to support gold prices.

Agencies