Democratic presidential hopeful Joe Biden’s strong showing in presidential primaries on Tuesday boosted sentiment on Wall Street (FREDERIC J. BROWN)

London (AFP) – Stock markets bounded higher Wednesday after the Federal Reserve sprang its first emergency rate cut since the global financial crisis to counter economic fallout from the coronavirus.

Wall Street also appeared to welcome a strong showing by Joe Biden in the Democratic presidential primaries on Tuesday, which boosted his chances against leftist Bernie Sanders.

In the first unscheduled rate reduction since 2008, the Fed axed Tuesday its key interest rate by a half point to a range of 1.0-1.25, explaining that “coronavirus poses evolving risks to economic activity”.

IMF chief Kristalina Georgieva followed up Wednesday with a forecast that global growth would slow below the 2019 level of 2.9 percent, while emphasising that the COVID-19 outbreak “is no longer regional issue, it is a global problem (that) calls for global response.”

The disease has so far killed more than 3,200 people worldwide and infected more than 93,000.

But equities in Europe and Asia advanced Wednesday as investor worries subsided, dealers said.

When trading cranked up again in New York, the Dow Jones index shot 2.7 percent higher, which some observers said also represented a “political relief rally” after moderate Democrat Biden won big in the “Super Tuesday” presidential primaries.

In commodities, oil rallied on indications that the OPEC crude producing cartel could slash output this week in order to prop up prices.

– Sentiment stabilises –

“While the market was worried that the Fed was panicking, it is difficult for investors to totally ignore the measures that are being put in place,” Rabobank analyst Jane Foley remarked.

“Additionally, the numbers of new coronavirus cases in China dropped. Although they continued to grow outside of China, this is still a bit of encouraging news,” she noted.

The deep cut in US rates on Tuesday followed a statement from G7 finance ministers that they stood ready to take “appropriate actions… including fiscal measures” in response to the virus.

– ‘Fairly ineffectual’ rate cut? –

“It is the first emergency cut since the financial crisis — and the rate cut will be fairly ineffectual in offsetting the coming hit to the economy from the coronavirus,” said Kingswood chief investment officer Rupert Thompson, predicting that the Bank of England could follow the same path.

An International Monetary Fund statement said Wednesday that a special financial and monetary committee tracking the virus urged the IMF “to use all its available financing instruments to help member countries in need.”

In Asia, the Tokyo stock market gained 0.1 percent, while Shanghai added 0.6 percent.

Seoul surged more than two percent as South Korea — the worst virus-hit country outside China — reported a sharp drop in new cases, and the government planned a $10-billion stimulus budget.

Hong Kong fell 0.2 percent after a gauge of manufacturing, construction, wholesale, retail and services activity in the city fell in February to its lowest level since records were first compiled in mid-1998. 

The Fed rate cut sent yields on 10-year US Treasuries, a go-to asset in times of turmoil, below one percent for the first time on record. Gold, another fallback for worried investors, was steady at $1,641.07

Oil prices added around two percent after OPEC advisers suggested the group, along with other producers including Russia, slash output by up to a million barrels a day.

– Key figures around 1430 GMT –

London – FTSE 100: UP 1.6 percent at 6,824.16 points

Frankfurt – DAX 30: UP 1.5 percent at 12,160.30

Paris – CAC 40: UP 1.5 percent at 5,473.97

EURO STOXX 50: UP 1.6 percent at 3,427.30

New York – Dow: UP 2.7 percent at 26,613.88

Tokyo – Nikkei 225: UP 0.1 percent at 21,100.06 (close)

Hong Kong – Hang Seng: DOWN 0.2 percent at 26,222.07 (close)

Shanghai – Composite: UP 0.6 percent at 3,011.67 (close)

Dollar/yen: UP at 107.30 yen from 107.13 yen at 2200 GMT

Euro/dollar: DOWN at $1.1108 from $1.1173

Pound/dollar: UP at $1.2816 from $1.2811 

Euro/pound: DOWN at 86.69 pence from 87.22 pence

Brent Crude: UP 1.7 percent at $52.75 per barrel

West Texas Intermediate: UP 2.1 percent at $48.18

Disclaimer: Validity of the above story is for 7 Days from original date of publishing. Source: AFP.