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U.S. Stock ETFs Rally as China Promises to Support Economy

This article was originally published on ETFTrends.com.

U.S. markets and stock ETFs climbed Wednesday after China promised to support local business with another round of stimulus measures to combat the slowdown in the wake of the coronavirus contagion.

On Wednesday, the Invesco QQQ Trust (QQQ) increased 1.0%, SPDR Dow Jones Industrial Average ETF (DIA) gained 0.4% and  SPDR S&P 500 ETF (SPY) advancd 0.5%.

China’s Ministry of Industry and Information Technology said the government will connect factories with technology companies to pinpoint any weakness in the supply chain, the Wall Street Journal reports.

China is also widely expected to cut its benchmark lending interest rate on Thursday, Reuters reports.

“It sounds as though investors are breathing a sigh of relief that they believe the worst of the coronavirus is behind us,” Paul Nolte, portfolio manager at Kingsview Investment Management, told Reuters. “Investors are feeling emboldened because central banks have got their back.”

The latest announcement is one of several initiatives Beijing and local Chinese authorities have taken to diminish the economic impact of the coronavirus, which has infected 75,200 people world-wide and killed over 2,000.

“The market doesn’t have much of a problem with anything at the moment,” Paul Ashworth, the chief U.S. economist at Capital Economics, told the WSJ, adding that investors are optimistic the government and central bank can mitigate the negative economic impact of the coronavirus.

Meanwhile, in the U.S., Nicholas Colas, the co-founder of research firm DataTrek Research argued that buying stocks is still the ongoing theme as we might see better earnings in teh second half of the year. Furthermore, interest rates should remain low, which on its own makes equities the more attractive play.

“That’s why equities haven’t sold off,” Colas told the WSJ.

Investors will also be closely looking at the minutes of the Federal Reserve’s most recent monetary-policy meeting for details on the policy makers’ outlook on where interest rates are headed, along with any changes designed to ease strains in money markets.

For more information on the markets, visit our current affairs category.

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