NZ stocks open strongly after Wall St stages big rebound

New Zealand share prices opened strongly following on from Wall Street's big rebound, which was based on optimism that the US Government would soon agree on a large fiscal stimulus package to combat the economic effects of the coronavirus pandemic.

By 10.55 am the S&P/NZX50 index was up 582 points or 6.4 per cent, building on Tuesday's 7.2 per cent gain.

Market Lister, head of private wealth research at Craigs Investment Partners, said the rebound reflected the extent to which stocks had been "beaten up" earlier in the week.

Since the close of business on Monday, the market has rallied by 14 per cent - driven in part by a huge rebound in the retirement sector stocks like Ryman, which has rallied by about 50 per cent in the last two trading sessions.

"We have had two strong days in a row now, so that's a pretty healthy bounce," Lister said.

"The question is: Is it sustainable?" he said.

US stocks had closed sharply higher on expectations that Congress was close to agreeing on a US$2 trillion fiscal stimulus package.

America's benchmark S&P 500 closed up 9.4 per cent, the Nasdaq was up 8 per cent, and the Dow Jones Index was up 11.4 per cent,

Sharemarkets have been positive over the past 24 hours.

Australia's share market was up 4.2 per cent and the UK's FTSE was up 9.1 per cent.

The New Zealand 10-year bond yield settled to trade at around 1 per cent yesterday.

On the local market, most stocks were either steady or firmer.

Among the larger cap companies, Ryman rallied by $2.18 or 26 per cent to $10.40.

Respiratory products maker Fisher and Paykel Healthcare, which has been classed as an essential service due to the pandemic, rallied by 43c or 1.43 per cent to a record $30.43.

Alternative milk company a2 Milk gained 54c or 3.3 per cent at $16.63.

Fletcher Building, despite announcing that it would cancel its interim dividend and share buyback, rallied by 6 c to $3.46.

Overseas, investors have been frustrated waiting for the US government to do what it can to help the economy, which is shutting down by the day. The Federal Reserve is doing nearly all it can, and it launched its latest round of extraordinary aid Monday.

The buying circled the world. South Korean stocks surged 8.6 per cent, Germany's market jumped 8.7 per cent and Treasury yields rose in a sign that investors are feeling less fearful.

"I don't think there's any more confidence in the fundamental outlook, but the fact that we're making progress is good news," said Katie Nixon, chief investment officer at Northern Trust Wealth Management.

"It's sort of like, keep the patient alive in the emergency room so you can provide some treatment options."

The market has seen rebounds like this before, only for them to wash out immediately. Since the market began selling off on Feb. 20, the S&P 500 has had six days where it's risen, and all but one of them were big gains of more than 4 per cent. After them, stocks fell an average of 5 per cent the next day.

"One of the things to be careful about is thinking this will be the panacea or that this fiscal response will be sufficient," said Eric Freedman, chief investment officer at US Bank Wealth Management.

Ultimately, investors say they need to see the number of new infections peak before markets can find a floor. The increasing spread is forcing companies to park airplanes, shut hotels and close restaurants to dine-in customers. Altogether, estimates suggest at least 10 per cent of the US economy is shutting down, according to Rob Sharpe, head of investments and group chief investment officer at T. Rowe Price.

Economists are topping each other's dire forecasts for how much the economy will shrink this spring due to the closures of businesses, and a growing number say a recession seems inevitable.