-Last week? The end of days. This week?
-Trump says never saw anything quite like Monday’s rally
Asian stocks and crude oil prices were in rally mode early Tuesday on expectations that world economic leaders would prop up a global market hammered by the demand destruction from the coronavirus. If last week was one contaminated by panic, this one is infiltrated by optimism. The damage to lesser economies, however, could be problematic down the road.
Brent crude oil was trading at $52.61 per barrel as of 8 a.m. ET, up about 1.4% from the close on Monday. The global benchmark is clawing its way back after briefly dipping below $50 per barrel last week on sweeping demand concerns.
What a difference a few days makes. John Kemp with Reuters wrote on Friday that oil traders had priced in a coronavirus-driven recession, though the market mood today is one of cautious optimism. Asian markets notched strong performances Tuesday, with Thailand posting its strongest rally in years. That followed assurances from the Bank of Japan that the appropriate fiscal tools were ready at hand. US President Trump, meanwhile, gleefully welcomed Monday’s rally in equities, noting he’d “never seen anything quite like it.”
The Dow Jones Industrial Average climbed some 11% on Oct. 13, 2008, as investors bet the worst of the Great Recession was over. Markets rallied some 5.1% in the Monday session.
Markets are riding the wave carved by BOJ. On Tuesday, US Treasury Secretary Steven Mnuchin and Fed Chair Jerome Powell added their voice to the Group of Seven chorus of responsible management in the midst of the Lehman-like market collapse.
“We reaffirm our commitment to use all appropriate policy tools to achieve strong, sustainable growth and safeguard against downside risks,” the G7 statement read.
Trump during a meeting with his Colombian counterpart, Ivan Duque, said Washington would work with other countries grappling with the coronavirus in order to address the “fear of the unknown” for those without a vibrant healthcare system. Those fears may require herculean efforts to allay. Reports from countries such as Iraq suggest their healthcare systems are failing, Italian stress may overwhelm hospitals in the financial north and European leaders pledged financial support to Iran, which is up against the wall because of the US “maximum pressure” campaign. At the G20 meeting in Saudi Arabia in late February, IMF Managing Director Kristalina Georgieva said global coordination is essential to prevent any further contagion, pointing to the possibility of a jenga-effect on the global economy – once the emerging economies falter, the rest of the tower could collapse.