Wall Street soared at the start of trading on Friday as investors looked beyond a long-awaited but widely expected spike in US unemployment, putting the S&P 500 on track for its first weekly gain in three weeks.
The S&P 500 advanced 1% at the start, after increasing in Europe and Asia. The increase in global inventories was due in part to signs of a melting of trade tensions between the United States and China and to new indications that the worst of the coronavirus pandemic may have passed in many large economies.
Data from Washington showed a drop of 20.5 million pounds of payroll in the United States in April, the largest decline ever, with unemployment reaching nearly 15%. But investors were girded with worse.
“The worst monthly job losses of all time, to a large extent, were completely predictable,” said Peter Tchir, chief of macro strategy at Academy Securities. “We talked about record underemployment in early March when the states started to close. The weekly claims figures told the story. “
The Stoxx 600 Europe composite index rose 0.5% on Friday, as the benchmarks in Frankfurt and Paris rose by more than 1% each. In Tokyo, stocks rose more than 2%, while the Hang Seng in Hong Kong rose 1%. London markets were closed on a public holiday.
The stock market rally was announced to ease trade tensions after senior US officials said their trade pact with China remained on track despite lingering tensions over the spread of the virus.
In the U.S., gains followed a rally the previous day on the Nasdaq Composite, which offset losses this year thanks to strong progress for big tech companies, including Apple, Amazon, Alphabet, Facebook, Netflix and Microsoft.
Markets around the world have rebounded at an historic pace, as MSCI’s global equity measure has rallied by a quarter in just 34 trading days since it bottomed out on March 23. But the benchmark index is still down 15% from the end of 2019.
Investor confidence has been boosted in recent weeks by a “considerably improved” outlook on the trajectory of Covid-19 and the ability of governments to begin reopening their economies, said Marko Kolanovic, head of quantitative and derivative research at JPMorgan.
“We have seen a peak earlier than expected and a lower peak in the use of hospital resources, a wider spread of the virus than expected and we estimate a lower mortality rate than the consensus models,” he said. declared. “This means that economic activity could resume sooner than expected, and any future wave of potential viruses is likely to be less severe.”
Kolanovic said that while the economic collapse caused by the blockades was unprecedented, “so too is the global political response to cushion the impact and support a recovery while containment measures are relaxed ”.
In April, employment fell sharply in all industries, with sharp declines in recreation and hospitality, education and manufacturing. Investors and analysts have struggled to balance the market rebound with the economic meltdown seen across the country.
“If there is a silver lining in today’s bleak jobs report, it is by realizing that the economy cannot be worse than it is today,” said Chris Rupkey, economist at MUFG in New York. “Unemployment can only go down from there, as many states begin to reopen.”
In the European fixed income markets, traders were preparing for a Moody’s credit rating decision on Italy, expected after the markets closed on Friday. The country’s creditworthiness is just above the speculative, or undesirable, level with the rating company. Although a downward revision is considered unlikely, even a reduction in Moody’s outlook could trigger further selling pressure in the Italian government bond market, one of the largest in Europe, according to managers of funds.
Oil prices rose slightly on Friday, optimistic about a possible economic recovery after the viral emergency.
Goldman Sachs said this week that demand for oil should outstrip supply next month. The bank said that a rapid increase in demand as countries relaxed lock-in restrictions, coupled with lower supply as producers cut production, meant the market was on the verge of rebalancing.
Crude oil, the international benchmark, rose 2.5% to $ 30.19 a barrel. West Texas Intermediate, the American scorer, gained 3% to $ 24.30.