European stocks rebounded Friday, on the heels of an historic losing day, as more support appeared for hard-hit economies in the region, while several exchanges banned banned short selling of hard-hit Spanish and Italian equities.
U.S. stock futures pointed to a strong rally on Wall Street as investors there waited for a coronavirus aid package from Congress.
The Stoxx Europe 600 index XX:SXXP surged 8% to 319.87, after recording its worst-ever loss of 11% on Thursday, with record slumps for other indexes as well.
The FTSE MIB Italy index IT:I945 soared 17%, reversing an equal loss on Thursday, its biggest ever, while Spain’s IBEX 35 index XX:IBEX rallied 11% after a 14% slump. Those gains came after exchange authorities in those countries and in the U.K. enacted a ban on short selling — a bet on shares falling — of beaten down stocks in Spain and Italy.
The German DAX 30 DX:DAX and the French CAC 40 indexes FR:PX1 each gained 8% or more%. The FTSE 100 index UK:UKX climbed 8%.
Germany vowed to spend whatever was needed to cushion its economy from the coronavirus and may spend at least 550 billion euros ($611 billion). Other governments have also been trying to shore up their healthcare systems and the European Commission on Friday unveiled budget flexibility for member states.
Italy’s health care system is under extreme pressure from the rapid spread of the coronavirus in that country which has been locked down by the government. Spain’s government is trying to slow the infection rate, closing schools and cultural events, while other countries across Europe are doing the same. Fitch Ratings downgraded the credit of the Italian banking sector outlook to negative from stable, citing stress from the virus.
Also supporting sentiment were fresh comments by the European Central Bank, which left markets disappointed with its decision not to cut interest rates on Thursday. In a blog post, ECB chief economist Philip Lane said the central bank retains the option of future cuts in the policy interest rate, if warranted by tightening financial conditions or a threat to its medium-term inflation aim. He said the current situation would make an interest-rate cut less effective.
Lane also said the ECB would “ensure that the elevated spreads that we see in response to the acceleration of the spreading of the coronavirus do not undermine transmission,” after President Christine Lagarde jarred markets by saying it wasn’t the central bank’s job to close spreads.
Other central banks also leapt to action on Friday. Norway’s central bank cut its policy interest rates to 1% from 1.5% to help soften the economic blow to the country from the coronavirus outbreak and plunging oil prices. U.S. crude oil prices US:CLJ20 rose 7% Friday in a week that has seen 18% wiped off the contract. Global benchmark Brent crude UK:BRNK20 gained 6%, with the contract down 21% for the week.
Dow futures US:YM00 hit limit up on Friday of over 1,000 points following the worst day for Wall Street since Oct. 1987, after President Donald Trump imposed a 30-day U.S. entry ban for Europeans in response to the coronavirus crisis.
But the mood shifted Friday after House Speaker Nancy Pelosi, D-California, said she and the Trump administration were near agreement on a coronavirus aid package that would include sick pay, free testing and other resources.
Among individual stocks, Roche Holding AG CH:ROG climbed 11% after the Swiss drugmaker said it had won emergency approval from the Food and Drug Administration for a high-speed coronavirus test, that would give results in three and a half hours. Fellow drugmaker Novartis AG CH:NOVN climbed nearly 12%.
Oil companies were climbing as the price of crude climbed, with Royal Dutch Shell Group PLC US:RDS UK:RDSA up 12%, while banks were also in the black, with Italy’s Banco BPM SpA IT:BAMI climbing 23%. Shares of Spain’s Banco Santander SA US:SAN ES:SAN surged 14%.