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U.S. Senate Passes Massive Stimulus Package
Topic of the day
The Senate approved the largest economic stimulus package in recent memory, moving the estimated $2 trillion bill to the House as Congress seeks to give American families and businesses a financial shield against the ravages of the new coronavirus pandemic. Senators approved the legislation after round-the-clock negotiations between the Trump administration and leading senators. Following precipitous declines, investors in the past two days have sent U.S. stocks soaring in anticipation of the bill's passage. President Trump has said he would sign it immediately. Steny Hoyer (D., Md.), the House majority leader, said late Wednesday that the House would consider the stimulus bill on Friday.
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The SMI continued its rally Wednesday, rising 2.9 percent to 8,989 points after a volatile day. While measures to counteract the effects of the corona crisis gave support, the fast rising numbers of infected weighed on the market. The passing of a USD 2 trillion fiscal package in the US had already been priced in Tuesday. Germany’s ifo business climate index slumped to 86.1 in March from 96 in February. Insurers Zurich Insurance rose 7.3 percent and Swiss Re 6.5 percent, profiting from the stock market recovery and bond buying programmes. Credit Suisse gained 5.9 percent after continuing to improve profitability in Q1. The bank emphasised it was less vulnerable to the corona crisis after restructuring and reducing commitments in critical areas. Competitor UBS rose 3.2 percent. ABB rose 4.5 percent although analysts lowered their target and maintained their “underweight” recommendation. Defensive heavyweights Novartis rose 2.7 percent, Nestle 2.6 percent and Roche just 1.4 percent.
European stocks rose as the German and U.S. governments took fiscal policy action to limit the economic impact of coronavirus. The Stoxx Europe 600 rose 3.1%, the FTSE 100 gained 4.5%, the DAX advanced 1.8% and the CAC-40 increased 4.5%. The German government announced a rescue package worth over EUR750 billion while U.S. lawmakers agreed to a $2 trillion spending bill to shore up the economy during the coronavirus pandemic. European leaders are preparing to spar Thursday over whether to issue common debt to counter economic pain from the new coronavirus and ease pressure on embattled countries like Italy, reviving memories of the region's sovereign debt crisis nearly a decade ago. Europe's response to the fast-moving economic crisis has so far been uneven, with rich northern countries including Germany unveiling massive fiscal support packages aimed at shielding businesses and workers, while those in the highly indebted south employ more modest measures. That current status could aggravate an economic gap that ultimately threatens the future of the currency union.
U.S. stocks soared in frenetic trading, heading for their first back-to-back gains since February, after lawmakers and the White House reached an agreement on a $2 trillion stimulus package. The Dow Jones Industrial Average jumped 1,147 points, or 5.5%, to 21852, extending a rally that propelled it to its biggest one-day advance since 1933 just a day earlier. The S&P 500 was up 4.3% and the Nasdaq Composite climbed 2.4%. Investors have been eager to see the government commit to further aid for the economy as the growing coronavirus pandemic has shut factories, sent students home from universities and upended travel for millions of Americans. The pending legislation is likely to include direct financial payments to many Americans, as well as loans to businesses-reassuring some who have been worried about the economic fallout from the pandemic. "We're in a global economic freeze, and we don't know how long it'll take to thaw," said Stephen Dover, head of equities at Franklin Templeton. Mr. Dover added that while it has been comforting to see governments and central banks roll out measures to mitigate the economic fallout from the pandemic, "we still don't know how long people are going to stay at home, and that's the big swing factor."
In Asia, stocks diverged as Japan's Nikkei 225 lost 4% in morning trading, while Hong Kong's Hang Seng was flat and Australia's ASX 200 rose 3.2%. Japanese stocks were down broadly, with real-estate shares falling especially sharply, after the benchmark Nikkei Stock Average posted its biggest percentage-point gain in 11 years on Wednesday.
Treasury yields were little changed, as Congress moved toward passing a $2 trillion rescue package and the market showed signs of stabilizing. Investors and analysts have pointed to signals of improved liquidity in recent days, though conditions could still improve among the longest maturity bonds. The 10-year yield was recently 0.836% vs. 0.813% Tuesday.
UBS rises BMW to Buy and lowers Ford and Tesla to Neutral
JPM lowers the Siemens target to 90 (128) EUR – Overw.
JPM lowers the Schneider Electric target to 78 (110) EUR – Overw
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