Markets rise after governments double down on financial assistance
Governments around the world Tuesday ramped up measures to provide immediate financial relief to citizens and inject stimulus to their battered economies. For the first time, governments like France‘s and Britain’s are calling the COVID-19 the enemy in “war” terms.
In addition to previous measures, Washington announced on Tuesday a US$1-trillion package that would literally put cash into the hands of ordinary Americans. Also, the U.S. Fed announced a new program to encourage lending, barely 48 hours after slashing interest rates to near zero. Here, Prime Minister Trudeau (who tested negative, though his wife tested positive) will convene the House of Commons on Wednesday and announce new measures.
By now, virtually all North American and European countries have locked down their countries, closing their borders except to returning citizens and shutting even restaurants and bars from Paris to Vancouver. The mantra echoed in media and social media is “social distancing.” Another mantra that governments are repeating is “whatever it takes.”
The sum of all this furious activity brought some comfort to investors Tuesday.
Canadian Banks Among Big Gainers…
The Dow soared over 1,000 points, while the S&P and Nasdaq leapt 6% or more. The TSX gained 4.44%, still dragged down by plunging oil prices driven by the Saudi-Russian feud. Canadian banks were among the day’s big gainers with Royal Bank up 3.41%. Amazon rallied over 7% on hopes that Americans will order more stuff now that they are sequestered at home.
Costco enjoyed an 8.41% bump as Americans continue to load up on supplies. Meanwhile, mineral stocks continues to act as a safe haven. Silvercorp exploded by 41%. Anything stock named “gold” or “silver” was up 10, 20 or 30%, such as Alamos (31.25%).
Looking ahead, however, all this economic damage and the government money throw at it is leading more and more analysts to utter to R word, recession. It is a growing possibility, though the consensus is that it will be a short, mild one that won’t result in vast layoffs.