By David Randall
NEW YORK (Reuters) – A jump in the price of oil and the promise of more government stimulus to ease the economic pain inflicted by the coronavirus pandemic helped calm global equity markets Wednesday, prompting investors to edge out of perceived safe havens like U.S. Treasuries.
U.S. crude and Brent both rose more than 5% after touching their lowest levels since 1999 on the prospects of further production cuts to reduce the glut in the oil market.
MSCI’s gauge of stocks across the globe <.MIWD00000PUS> gained 1.58% following a broad rally in Europe and slight losses in Asia.
In early trading on Wall Street, the Dow Jones Industrial Average <.DJI> rose 381.45 points, or 1.66%, to 23,400.33, the S&P 500 <.SPX> gained 48.71 points, or 1.78%, to 2,785.27 and the Nasdaq Composite <.IXIC> added 159.35 points, or 1.93%, to 8,422.58.
A historic two-day plunge in the oil market, which sent futures contracts negative for the first time in history, had erased more than 1,000 points from the Dow before Wednesday’s open.
The U.S. Congress will pass a nearly $500 billion coronavirus aid bill on Thursday, House Speaker Nancy Pelosi said, that includes an additional $321 billion for a previously set-up small business lending program that quickly saw its funds exhausted.
“Though this bill will address some of the shortfalls, this will not likely be the end for stimulus,” according to a note from BofA Global Research, adding that the firm expects Congress to pass another large package worth up to $1.5 trillion.
Gains in the oil market helped draw investors into riskier assets, pulling government bond yields higher. Benchmark U.S. 10-year notes last fell 10/32 in price to yield 0.6017%, from 0.571% late on Tuesday.
European Union leaders will meet on Thursday to discuss measures to increase aid to help the region cope with the coronavirus outbreak..
Traders were also buoyed after Italy breezed through a major debt sale on Tuesday and speculation continued that the European Central Bank would provide more support measures.
U.S. crude recently rose 21.43% to $14.05 per barrel and Brent was at $20.88, up 8.02% on the day.
(Reporting by David Randall; Editing by Nick Zieminski)