Futures tied to the Dow Jones Industrial Average climbed 1.1%. The Stoxx Europe 600 gauge gained 2.8%, while China’s Shanghai Composite closed 0.7% higher.
The rally came after hopes for a wave of stimulus on Monday drove the Dow up 5.1%, its biggest gain in more than a decade.
7 p.m.Mon.10 p.m.2 a.m.Tues.6 a.m.
All times ESTSources: FactSet (indexes, futures); Tullett Prebon (bonds)
The European Central Bank stands ready to take steps to safeguard the economy, President Christine Lagarde said Monday evening, echoing several central bankers around the world including Federal Reserve Chairman Jerome Powell. Finance ministers from the Group of Seven countries are due to have a telephone meeting on Tuesday to coordinate their response to the coronavirus.
“This talk of concerted and coordinated action from central banks has had a reaction, but what form that takes time will tell,” said Russ Mould, investment director at AJ Bell. “Cutting interest rates is not going to make someone take a flight to Italy if they’re too scared to do it.”
Brent crude, the global benchmark for oil prices, rose 2.8%. Gold remained mostly flat.
The performance was more muted in Asia, as a strong rally started to fade through the course of the day. Hong Kong’s Hang Seng Index closed mostly flat, while Japan’s Nikkei 225 dropped 1.2%.
In bond markets, the yield on the benchmark 10-year U.S. Treasury rose to 1.150%, from 1.085% Monday, when it touched a record low despite the rally in U.S. equities. Yields on sovereign bonds from Germany, U.K. and France also gained as investors left the safety of government debt for riskier assets. Yields move inversely to bond prices.
Bond futures are pricing in a 100% chance of interest rates being 0.5 percentage point lower by the March meeting, and a more than 70% chance that rates will be 0.75 percentage point lower than by April, according to the CME FedWatch tool.
Some analysts and investors questioned how effective monetary policy could be in counteracting the economic effects of a public health crisis.
“Cutting rates helps boost investors’ confidence, but it won’t help sick or quarantined people get back to work,” said Bruce Pang, head of macro and strategy research at China Renaissance Securities (HK) Ltd. Fiscal policy would be more effective than action from central banks, whose results would be indirect and distorted, Mr. Pang said.