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Coronavirus: TSX, Wall Street rebound after record-setting declines

Click to play video 'Markets, oil prices plunge over COVID-19 fears' Markets, oil prices plunge over COVID-19 fears
WATCH: Markets, oil prices plunge over COVID-19 fears – Mar 9, 2020

Stock markets around the world bounced back Tuesday from record-setting declines after U.S. President Donald Trump said he would ask Congress for a tax cut and other measures to ease the pain of the spreading coronavirus outbreak.

In Toronto, the benchmark S&P/TSX composite index was up 526 points, or 3.6 per cent, to 15,040 at 9:34 a.m. ET, just minutes after markets opened in North America.

Major indices on Wall Street staged similar rebounds, with the S&P 500 opening higher by 66.92 points, or 2.44 per cent, at 2,813.48. The Dow Jones Industrial Average rose 601.98 points, or 2.52 per cent, at the open to 24,453.00.

Oil prices also recovered some of their losses in Monday’s record-setting plunge.

READ MORE: Coronavirus: Italy extends lockdown to entire country as new COVID-19 cases surge

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Brent roared back as much as 10 per cent on hopes a supply cut deal could be rescued while most benchmark government bond yields were off record lows as hopes for stimulus in the face of the epidemic boosted risk sentiment.

The oil and gas and mining sectors were leading the charge for Europe as oil recovered some of Monday’s 25 per cent fall following what had appeared to be the complete breakdown of a crucial global oil pact between OPEC and Russia.

Yields on benchmark U.S. 10-year Treasury debt more than doubled to 0.70 per cent and those on German Bunds jumped around 20 basis points at one point as investors pared some safe-haven holdings, though they were beginning to ease again.

The yield, or the difference between the market price and what investors will receive if they hold the bond to maturity, is seen as a measure of economic confidence. Investors shift money into bonds if they expect economic growth and stock prices to weaken. That pushes up the bond’s market price and narrows the yield.

Click to play video 'COVID-19: Stock markets in Canada, crude oil prices collapse' COVID-19: Stock markets in Canada, crude oil prices collapse
COVID-19: Stock markets in Canada, crude oil prices collapse – Mar 9, 2020

Around the world, London opened 1.8 per cent higher and Frankfurt advanced 1 per cent. China’s main stock index rose 1.8  per cent and Tokyo closed up 0.9 per cent.

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Monday’s global selloff reflected alarm over economic damage from the coronavirus that emerged in China in December. Anti-disease controls that shut down Chinese factories are spreading as the United States and European countries close schools, cancel public events and impose travel controls.

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Anxiety mounted after Italy, the hardest-hit place in Europe, said travel controls imposed earlier on its north would be extended nationwide. Ireland canceled St. Patrick’s Day parades and Israel ordered visitors quarantined ahead of Passover and Easter, one of the busiest travel periods of the year.

The mounting losses and a flight by investors into the safe haven of bonds have fueled warnings the global economy, which already was showing signs of cooling, might be headed into a recession.

READ MORE: Plunging oil prices amid coronavirus fears slam Wall Street, TSX sinks to 14-month low

The drop in U.S. stock prices was so sharp that it triggered Wall Street’s first trading halt in more than two decades. The Toronto Stock Exchange also implemented a similar, temporary freeze.

But Trump’s comment that he will seek relief for workers as ripple effects of the outbreak spread gave some investors an excuse to resume buying.

“This is not like the financial crisis where we don’t know the end is in sight,” said Treasury Secretary Steven Mnuchin. “This is about providing proper tools and liquidity to get through the next few months.”

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COVID-19: Pence expects “dramatic” increase in ability to test for COVID-19 across U.S – Mar 9, 2020

Oil prices plunged 25 per cent on Monday after Russia refused to roll back production in response to virus-depressed demand. Saudi Arabia signaled it will ramp up its own output.

Stock markets usually welcome lower energy costs for consumers and businesses. But the decline cuts into revenue for producers, including the United States. And the abrupt drop, coming amid virus fears, rattled investors.

On Wall Street, the S&P 500 index fell 7.6 per cent in biggest one-day drop since Dec. 1, 2008. The Dow lost 7.8 per cent and the Nasdaq composite gave up 7.3 per cent.

The S&P dropped 7.4 per cent in the first few minutes of trading, triggering an automatic 15-minute market-wide trading halt. That has happened only once before, in 1997.

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The S&P 500 has fallen 18.9 per cent from its Feb. 19 record and has lost $5.3 trillion in value. U.S. stocks are close to entering a bear market, defined as a drop of 20 per cent from their peak.

European stock indexes already are in a bear market after recording their biggest declines since the 2008 crisis.

Central banks in the United States, China and other countries have cut interest rates to try to shore up economic activity. But economists warn that while rate cuts might help to buoy consumer demand, they cannot reopen factories that are closed due to quarantines or lack of workers and raw materials.

READ MORE: Coronavirus — How is the COVID-19 outbreak affecting gas prices in Canada?

“Even coordinated policy responses are not a tried and tested panacea and by no means guarantee the ability to durably pull markets back from the brink of bear territory,” Vishnu Varathan of Mizuho Bank said in a report.

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— With files from Erica Alini at Global News and Reuters