By Peter Nurse
Investing.com - European stock markets are set to open higher Tuesday, rebounding from Monday’s sharp losses, helped by more central bank largesse and promises of action from the G7 and the Eurogroup. However, these gains are likely to be hard won as the pandemic forces investors to face the possibility of several months of declining economic activity.
At 03:23 AM ET (0723 GMT), the DAX futures contract traded 435 points, or 5.1% higher. {{167|France's CAC 40 futures were up 101 points, or 2.6%, while the FTSE 100 futures contract in the U.K. rose 129 points, or 2.5%. Futures on the pan-eurozone index, the Euro Stoxx 50, climbed 119 points, or 5.1%.
Earlier Tuesday, the Bank of Japan pumped more than $30 billion into markets with an 84-day dollar funding operation. This move came after the world's six major central banks took a joint step to provide more cash dollars on Sunday as a rout in financial markets over the past week led to a scramble by banks and companies for dollar liquidity. In addition, the U.S. Federal Reserve cut short-term rates to near zero while pledging hundreds of billions of dollars in asset purchases.
Tuesday’s bounce follows hefty losses in Europe, while the Dow suffered its biggest one-day plunge ever on Monday, falling almost 3,000 points, after President Donald Trump said the worst of the outbreak could last through the summer and that it was not currently under control.
With governments in the United States and Europe closing borders, shutting restaurants and bars, closing schools and calling on citizens to stay home, it’s clear economic activity is going to take a severe hit during this process.
After all, the latest figures showed Chinese industrial output dropped 13.5% on the year in January and February, while retail sales fell 20.5%.
These numbers have prompted Goldman Sachs (NYSE:GS) to cut its estimate for China's first quarter gross domestic product to a year-on-year contraction of 9% from a previous forecast of 2.5% growth.
Talking of economic indicators, the U.K. unemployment numbers for January are due at 0530 AM ET (0930 GMT), but these figures have largely been made outdated by events. However, the German ZEW economic sentiment release for March, at 0600 AM ET, will be of interest as a gauge of the mood among the country’s investors as the coronavirus pandemic takes hold.
Oil markets have pushed back above the $30 a barrel level Tuesday, helped by the prospect of U.S. and other countries filling strategic storage. That said, it’s debatable how long this will support prices given the major hit to demand and the sharp increase in supply resulting from the collapse of the OPEC+ output restraint pact.
AT 03:23 AM ET (0723 GMT), U.S. crude futures traded 5.1% higher at $30.48 a barrel and the international benchmark Brent contract rose 3.2% to $31.02.
Additionally, gold futures rose 0.1% to $1,488.40/oz, while EUR/USD traded at 1.1146, down 0.3% on the day.