Tuesday, March 24, 2020

This Stock Delivered Biggest Surge in 4 Years

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What’s happening: Japanese stocks surged today to record their largest single-day gain in over four years, after global authorities increased stimulus measures to ease the economic impact of the novel coronavirus pandemic.

What happened: The Japan stock market closed higher for the second consecutive day. Investor sentiment in Japan was also lifted by hopes of huge buying by the BoJ (Bank of Japan) and public pension funds. The US Federal Reserve also disclosed an open-ended asset buying plan on Monday to support the smooth functioning of markets

Why it matters: After logging a gain of 2% on Monday, the Nikkei 225 spiked more than 7% today. Markets are expecting US lawmakers to sort out their differences and clear the economic support package of over $1 trillion. Germany is also expected to announce some major measures with the death toll rising across Europe. Various global central banks have announced measures to provide relief to the markets..

The Nikkei 225 closed 7.1% higher, recording its biggest daily rise since February 2016, to end at 18,092.35. The Nikkei's volatility index, an index measuring investor volatility expectations, plunged 14.3% to 46.69, after spiking last week to a nine-year high of 60.86.

Japan will likely face economic losses of around $6 billion if the Tokyo Summer Games are delayed, with the International Olympic Committee acknowledging a postponement for the first time.

Researchers in Japan have announced the development of a coronavirus test kit that provides results in just ten minutes. Total coronavirus cases in Japan have surpassed 1,100 with around 42 deaths.

The Japanese yen was trading at 110.42 against the US dollar, after reaching a low of 111.28 earlier in the session.

In corporate news, shares of SoftBank Group climbed 19%, continuing their upward momentum from Monday after the company disclosed asset sales worth $41 billion and a massive share buyback program. Shares of Japan's oil company Inpex Corp jumped 11%, while Tokyo Electron’s stock climbed 18%.

In economic news, the Jibun Bank Japan composite PMI fell to 35.8 in March, versus a final reading of 47.0 for February. The manufacturing PMI dipped to 44.8 in March, from February’s final reading of 47.8, while services PMI tumbled to 32.7, from 46.8 last month. The assessment of coincident index in Japan rose to 95.2 in January, versus a preliminary reading of 94.7.

What to watch: Investors are expecting Bank of Japan to step up and announce more stimulus measures to support the economy. Markets are also awaiting news related to the Olympic Games.

The Markets Today

     

US stocks will be in focus today, with investors expecting the clearance of the coronavirus economic relief package.

Context: US stocks closed lower on Monday after a volatile session, with the Senate failing again to clear the massive economic fiscal stimulus bill. Even the Federal Reserve’s announcement to buy unlimited assets was not enough to lift investor sentiment.

Details: After fluctuating through the trading on Monday, the Dow Jones and S&P 500 plunged to new three-year lows. In a procedural vote to clear the coronavirus economic relief package, there were 49 to 46 votes in favor of the bill, falling short of the required 60 votes to advance the motion.

The Dow Jones tumbled 3% to close at 18,591 on Monday, while the S&P 500 and Nasdaq 100 dipped 2.9% and 0.3%, respectively.

Housing stocks moved lower, with the Philadelphia Housing Sector Index declining by 7.5%. Banking and commercial real estate stocks witnessed weakness on Monday, along with most other major sectors. Gold stocks climbed sharply following a steep rise in the price of the metal.

The US is witnessing a rise in the daily number of coronavirus cases and the country’s total case count has crossed 46,400. The country has reported 590 deaths so far.

In corporate news, shares of Zoom Video Communications climbed 22% to a new 52-week high with the company benefitting from virtual communication methods being used by companies to support their WFH (work from home) models following the coronavirus outbreak

In other news, treasuries rose following the Fed's announcement of bonds purchases. The yield on the ten-year note fell 17.4 basis points to 0.764%.

Why it matters: US stocks are expected to rebound from yesterday’s losses, with futures pointing towards a higher open today. Markets are hoping for the clearance of the rescue package by US lawmakers. Investors also await the basket of economic reports due today, including services PMI, manufacturing PMI, new home sales and Richmond Fed manufacturing index.

What to watch: The IHS Markit services PMI, which was confirmed at 49.4 in February, is expected to fall to 42 in March. Manufacturing PMI is likely to decline to 42.8 in March, versus February’s reading of 50.7. New home sales, which rose 7.9% to an annual rate of 764,000 in January, is expected to decline 2% in February. The Richmond Fed Manufacturing Index is expected to rise to 9 in March, versus a reading of -2 in February

Other Market: European indices were trading higher at 9:00am GMT, with the FTSE 100, German 30 and French 40 up by 4%, 5.3% and 4.4%, respectively.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

News shaping
the markets today

     

What else to watch today

     

The UK’s CBI industrial trends orders, Brazil’s retail sales and the US Redbook index.