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U.S. Stocks Surge, Treasuries Sink on Economy Bets: Markets Wrap

Jeremy Herron and Claire Ballentine

(Bloomberg) -- U.S. stocks rallied the most since August, while Treasuries plunged as investors speculated the global economy will withstand any impact from the still-spreading coronavirus after China’s market sell-off eased.

The S&P 500 pushed its two-day gain to 2.2% and the Nasdaq 100 Index hit an all-time high as investors piled back into risk assets after last week’s rout. European and emerging-market shares rallied. Shanghai stocks rebounded from a record $720 billion wipeout. Treasuries tumbled with gold. Copper in London halted a 14-day slide. Oil bucked the trend, erasing gains that topped 2%. In company news, Tesla Inc. extended its torrid run, jumping 14%.

Pete Buttigieg was leading narrowly in long-delayed results in the Iowa caucuses Tuesday, appearing to cement his status as a credible moderate alternative to Bernie Sanders. after an extraordinary rise from little-known mayor of a small Indiana city to the top tier of the presidential race. Vermont Senator Sanders rallied his enthusiastic voter base to the second spot in the first contest for the Democratic nomination with 62% of the precincts reporting.

Investors appear to be taking some comfort from the measures Beijing has taken to contain the virus to Hubei province and to support economic growth. Still, travel restrictions continue and business shut-downs mount, with Macau closing casinos for another two weeks. Bulls have focused on strong corporate earnings and assurances of support from central banks.

“The lesson of today’s stock market rally is that while the coronavirus is a risk, it is not a material risk to the economic outlook which backstops corporate earnings always,” said Chris Rupkey, chief financial economist for MUFG Union Bank. “Coronavirus doesn’t increase the odds of a U.S. recession this year.”

Here are some key events coming up:

Euro-zone PMI data in its final version will be released Wednesday.The Reserve Bank of India’s interest rate decision is due Thursday.The U.S. employment report for January is set for Friday release.

These are the main moves in markets:

Stocks

The S&P 500 jumped 1.5% as of 4 p.m. in New York.The Nasdaq 100 added 2.3% to a record.The Stoxx Europe 600 Index surged 1.6%.The MSCI All-Country World Index rose 1.6%.The MSCI Asia Pacific Index surged 1.4%.

Currencies

The Bloomberg Dollar Spot Index edged lower.The British pound gained 0.4% to $1.304.The euro dropped 0.2% to $1.1043.The Japanese yen weakened 0.7% to 109.50 per dollar.The offshore yuan strengthened 0.3% to 6.9944 per dollar.

Bonds

The yield on 10-year Treasuries gained seven basis points to 1.60%.The two-year yield added six basis points to 1.41%.Germany’s 10-year yield climbed three basis points to -0.41%.

Commodities

West Texas Intermediate crude fell 0.9% to $49.68 a barrel.Gold futures weakened 1.5% to $1,558.20 an ounce.LME copper surged 2.2% to $5,648 per metric ton.Arabica coffee surged 1.7% to $1 a pound.

To contact the reporters on this story: Jeremy Herron in New York at jherron8@bloomberg.net;Claire Ballentine in New York at cballentine@bloomberg.net

To contact the editors responsible for this story: Sam Potter at spotter33@bloomberg.net, Jeremy Herron, Dave Liedtka

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