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Wall Street closes out best quarter in 22 years

TDT

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The US crisis is not over but investors are deciding to focus on the positives. (FT)

Wall Street stocks recorded the best quarter in more than two decades amid a broad rally in global financial markets ignited by a barrage of central bank stimulus and hopes of a forceful economic recovery.

The S&P 500 index soared more than 20 percent over the past three months, notching the largest rise since the final quarter of 1998.

Developed and emerging market stock prices overall have jumped 17 percent in the second quarter, according to MSCI’s All Country World index.

Europe’s Stoxx 600 gained almost 13 percent, with MSCI’s Asia-Pacific index up 15 percent.

Stimulus measures announced by central banks around the world, including a series of interventions by the US Federal Reserve to soothe unsteady markets, helped to lift stocks in April, said Max Kettner, strategist at HSBC.

Rising hopes for a rapid recovery in major economies helped to keep the momentum going later in the quarter, he said.

“Equities rebounded significantly in the second quarter with more than three quarters of the losses in [the] first quarter already recovered,” he said.

Still, many investors remain cautious given the uncertain trajectory of the coronavirus pandemic and questions over how quickly major economies will recover from the acute shock.

The US, the world’s biggest developed market, has remained a source of particular concern given the severe Covid-19 outbreaks in several states.

“The resurgence in the virus is not a surprise,” said Ethan Harris, an economist at Bank of America. “However, downside risks are growing.”

Harris said he expected “some reversal in economic activity in the hotspots as rules are reluctantly reversed and people become more cautious.”

Goldman Sachs research indicates lockdowns are tightening or the easing of restrictions has been put on hold for 40 percent of the US population.

Willem Sels, chief market strategist at HSBC Private Banking, said the key question now was whether Covid-19 flare-ups “become systemic enough to change the positive momentum in earnings revisions and economic growth, or will people take the view — as I think they currently do — that we have bottomed in terms of that.”

US equity markets extended gains on Tuesday, with the S&P 500 ending higher by 1.5 percent and the Nasdaq Composite up 1.9 percent.

Wall Street’s gain followed a mixed session in Europe, where the FTSE 100 ended down 0.9 percent and the Euro Stoxx 50 was little changed. (Financial Times)

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