Sharemarkets continue to ignore the continuing downside risks from the COVID-19 epidemic and measures governments have enacted to slow and control the rate of infection and deaths.
While the global infection total nears 2 million and deaths top 120,000, investors are sending share higher in the belief that the worst is over. Moves by a dozen US states to start re-opening activity is adding to the belief that the worst is over and it is all sunshine and share gains from now on.
The whole edifice is once again being supported by the US Federal Reserve and other central banks – if they were to take the loan and spending support measures away, the whole lot would collapse in quick time.
Overnight Tuesday US investors ignored weak results from two major US banks – JPMorgan and Wells Fargo.
JPMorgan was the bellwether – a 69% slide in earnings on a small fall in revenue and an $US5.8 billion sent to its loan loss reserves in preparation for an expected spate of customer loan defaults.
Wells Fargo saw its earnings slump 89% to $US653 million for the quarter. It pushed $US3.1 billion into its loan loss reserves in anticipation of a surge in problem loans down the track.
Citigroup and Morgan Staley are reporting tonight and are expected to release similar results – all ignored by investors.
As well the International Monetary Fund produced the first estimate of damage to the global economy which will suffer its worst year since the Great Depression of the 1930s.
The IMF expects the global economy to shrink 3% this year before rebounding in 2021 with 5.8%. It acknowledges that prospects for a rebound next year are clouded by uncertainty.
In January, before COVID-19 emerged as a grave threat to public health and economic growth the IMF had forecast moderate global growth of 3.3% this year.
The US economy will contract by 5.9% this year while Australia will see a 6.7% fall this year and a 6.1% rise in 2021.
Wall Street, of course, continued to ignore this realism and went for the fairytale of everything will be OK when the economy re-opens, which it won’t because that’s when the losses will be really felt and why the big banks are putting billions of dollars into their loss reserves.
Tech shares rebounded on Tuesday and pushed Nasdaq into bull territory (a 20% plus gain from the most recent low).
The Dow closed up 558.99 points, or 2.3%, at 23,949.76 and the S&P 500 index jumped 3.06% to end at 2,846.06.
Both benchmarks are near their highest levels since March 10 which is when the viral outbreak began to squeeze parts of the financial markets and economy.
The Nasdaq saw its fourth straight gain and exited bear-market territory. The tech-heavy index rose 3.95% to finish at 8,515.74, supported by gains from online retailer and cloud-computing giant Amazon.com which ended the session at a record high.
Gains in electric-car maker Tesla and Google-parent Alphabet rounded out the best performers for the Nasdaq.
Nearly a dozen US states began working on plans to reopen for business, in the aftermath of the COVID-19 shutdown.
Overnight trading on the ASX 200 futures market saw a modest gain of around 15 points
That was after the ASX 200 closed up 100.8 points, or 1.9%, at 5488.1 on Tuesday, extending the rebound from the lows hit less than a month ago to 24.7%.
The Aussie dollar traded well over 64 US cents and was around its session highs of 64.41 in early Asian trading on Wednesday.
