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Stocks rally as Fed announces $2.4tn support for US economy

Oscar Williams-Grut
Senior City Correspondent, Yahoo Finance UK
US Federal Reserve chairman Jerome Powell. (Kevin Lamarque/Reuters)

European stock markets closed higher on Thursday 9 April ahead of the long Easter weekend, after the US Federal Reserve announced a $2.4tn (£1.9tn) package of support for the US economy.

The Fed said it plans to provide up to $2.3tn in loans to support households and local governments. The central bank also published more details on its Main Street Lending Program, which will provide up to $600bn in loans to small and medium businesses.

Federal Reserve chairman Jerome Powell followed up the announcement by saying he would act “forcefully, proactively and aggressively” to support the US economy.

The announcement helped US stock markets to open higher. The S&P 500 (^GSPC) rose 1.4%, the Dow Jones Industrial Average (^DJI) climbed 1.5%, and the Nasdaq (^IXIC) was up 0.25%.

European stocks had been volatile in early trade but the strong US open helped spur them higher. The FTSE 100 (^FTSE) closed up 2.8%, France’s CAC 40 (^FCHI) rose by 0.6%, and Germany’s DAX (^GDAXI) was higher by 1.7%.

The rise in global stocks came despite higher than expected US jobless numbers. About 6.6 million Americans filed new unemployment claims over the last week, the US Department of Labor said on Thursday. That was higher than the consensus forecast of 5.5 million.

“In an expertly timed intervention, not long after that jobs data the Federal Reserve revealed its latest stimulus package,” said Connor Campbell, a financial analyst at SpreadEx.

“The move partially explains why the markets have somewhat taken the jobs data in their stride in these last few weeks – the worse the numbers were, the more likely the Fed was to act.”

Elsewhere, the Bank of England early on Thursday announced a move to directly support UK government spending. The move, though unexpected and somewhat controversial, did little to change sterling exchange rates.

Read more: Bank of England to finance additional UK government spending

Investor attention remains focused on signs that the global coronavirus pandemic could be reaching its peak, fuelling hopes that economies may start to come out of lockdown in the coming weeks.

A team at Deutsche Bank tracking the pandemic wrote in a note on Thursday morning: “In the past 24 hours, we have seen new cases rise 6.1% (87,028 cases), down from 9.0% a week ago.

“New fatalities rose 7.8%. That has fallen close to Monday and Sunday’s levels after spiking on Tuesday to nearly 10%.”

Read more: £28bn of UK dividends cancelled due to coronavirus

Oil was trading higher as the OPEC+ oil cartel began its first virtual meeting to discuss a potential cut to oil output.

The group, which includes Russia, began the summit shortly before 4pm UK time. Crude oil (CL=F) was trading up 2.4% to $25.70 per barrel and Brent (BZ=F) was 1.6% higher at $33.39 ahead of the meeting. Both oil prices had been much trading higher earlier in the session, amid exceptions of a cut to oil production.

Overnight in Asia, Japan’s Nikkei (^N225) closed flat, while the Hong Kong Hang Seng (^HSI) rose 1.1%, China’s Shanghai Composite (000001.SS) climbed 0.3%, and Korea’s KOSPI (^KOSPI) rose 1.6%.