U.S. stocks rallied despite new coronavirus outbreaks

Stock markets fluctuated during the last few weeks. After historic lows, shares surged forward due to the optimistic sentiment that the pandemic was retreating at last. However, the rally hasn’t lasted long. New outbreaks dampened the mood and caused massive sell-offs a few days ago.

Despite dire news, U.S. equities and European stocks rallied on Wednesday due to the hopes of more monetary stimulus from governments.

The S&P 500 soared during the last session. In Europe, the Stoxx Europe 600 Index also jumped due to increases in real-estate and construction-firm shares. Treasuries were steady, but the U.S. dollar fluctuated.

It seems investors are determined to maintain an optimistic view, preferring to bet on governments not pulling back from gradually reopening businesses. Iran declared that it might need a new lockdown.

Unfortunately, infections rose from China to Brazil over the last few days. Brazil has registered a record of 34,918 new infections. Florida reported record new cases in the U.S. as well. And China is escalating containment measures in Beijing, starting with canceling flights.

Chinese and Indian troops are engaged on their borders, which is causing more uncertainty. North Korean plans for troop deployment already impacted sentiment in Seoul negatively.

The Fed says recovery will be a long time to come

Jerome Powell, Federal Reserve Chairman, announced that the U.S. economy has a long way to go before it recovers from the pandemic’s substantial damage.

Stock markets could remain stretched between a stream of positive macro figures confirming that the worst is in the past. The health situation will probably remain a threat in several regions for some time.

Xavier Chapard, a global macro strategist at Credit Agricole, stated that the Fed’s priorities are currently shifting from emergency actions directed at preventing a market melt-down to long-lasting measures to support the fastest possible rebound in the economy.