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Global stocks and US futures rose, as lawmakers in Washington and the Trump administration reached a deal on an estimated $2 trillion stimulus package to limit the economic damage from the coronavirus pandemic. It will, among other things, provide direct financial checks to many Americans and drastically expand unemployment insurance.
The Context: The Dow posted its largest single-day gain since 1933 yesterday, on news that a deal was coming together. Signs of a major injection of cash into the economy appeared to give investors some solace as the US reported an uptick in confirmed Covid-19 cases and braced for unemployment claims.
Federal Reserve Taps BlackRock to Purchase Bonds for the Government
The Fed asked BlackRock to steer tens of billions of dollars in bond purchases. The firm will purchase certain mortgage-backed securities on behalf of the New York Fed and also oversee two large bond-buying programs.
Why This Matters: The tasks are a reflection of the influence of the world’s largest money manager place, but also put BlackRock in a potentially controversial position of implementing the administration’s response to the coronavirus pandemic. The firm will face significant scrutiny on how it prevents conflicts of interests.
Occidental Petroleum Cuts Pay for Staff, Executives
Occidental Petroleum is cutting salaries for its US employees by up to 30% in a bid to slash expenses, according to an internal email reviewed by the WSJ. Occidental confirmed it was taking steps to “ensure the health of the company while protecting jobs.”
The Context: The company is facing plunging oil prices, high debt from an ill-timed acquisition and falling demand due to a halt in economic activity because of the coronavirus. It said the drastic steps were necessary to weather the steep decline in oil prices.
Coronavirus Derails Europe’s Market for Bad Loans
For the past six years, as Europe recovered from its sovereign-debt crisis, US private-equity firms and fund managers went on a buying spree for as much as €600bn in bad loans from capital-strapped banks. But now the market for nonperforming loans is in disarray.
Why This Matters: This is a sharp turn of events that could leave investors with a pile of overvalued assets and banks struggling with new sour loans on top of old. For Europe’s already fragile banks, that spells trouble.
The Oil Crash Is Hitting This Investment Hard
The plunge in crude-oil prices is sending shock waves through closed-end funds tracking the energy sector, highlighting how the market turmoil is hitting products popular with ordinary investors seeking to boost returns during the long bull market.
Why This Matters: As crude prices have plummeted, hurting shares of energy companies and the market value of the funds’ holdings, several have been forced to reduce their leverage by selling securities. That has cut down on the amount of money available to pay investors, which likely will lead to funds cutting their distributions, asset managers say.
- Global stocks rose as investors cheered an agreement between the Trump administration and lawmakers on a sweeping rescue deal.
- The Stoxx Europe 600 gained 2.8%, led by shares in carmakers and financial services firms.
- Asian shares leaped. The Nikkei 225 climbed 8%, hitting a two-week high. South Korea’s Kospi benchmark rose 5.9%
- Futures linked to the Dow Jones Industrial Average rose almost 3%.
- The ICE US dollar index eased 0.8%.
- Brent crude oil futures edged lower.
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