Global stocks climbed and credit markets rallied after the Federal Reserve unleashed new stimulus to prop up the economy in the face of another surge in US unemployment claims.
The measures by the US central bank, which said it would provide an additional $2.3tn in loans to shore up the economy during the coronavirus pandemic, included a hotly anticipated move to back the $1.2tn junk bond market where lower-rated companies secure funding.
The largest high-yield bond exchange traded fund — known by its ticker HYG — soared 7 per cent at the market open in New York, putting it on pace for its biggest one-day gain since the financial crisis. A barometer of higher quality investment-grade corporate bonds, the ETF called LQD, rose 3 per cent.
The junk bond market had trailed the rebound seen across global equity bourses over the past month, as the first measures introduced by US and European policymakers centred on purchases of higher-grade debt.
The S&P 500, which has advanced more than 25 per cent from its March lows, was up almost 2 per cent in mid-morning trading, led by gains in utility and bank stocks. The technology-heavy Nasdaq Composite was up 0.7 per cent.
The Fed move to buy shares in high-yield bond ETFs and debt from US municipalities coincided with the release of data showing that 6.6m Americans filed new unemployment claims in the week ended April 4, as the US labour market reels from the economic impact of lockdowns.
The latest jobless claims "emphasise how important it is that small and midsized businesses feel the benefits of Fed policy which, typically, has only tended to reach the larger-sized businesses", said Seema Shah, chief strategist at Principal Global Investors.
London's FTSE 100 was 2.2 per cent higher. The pan-European Stoxx 600 index advanced 1.3 per cent, to trade around 23 per cent above its mid-March lows.
Separately, oil prices rose ahead of a meeting between Saudi Arabia and Russia later on Thursday, which has raised hopes of a deal to curb production and underpin sliding prices.
G20 oil ministers are due to meet on Friday to discuss measures to support an industry grappling with a sharp fall off in demand since the coronavirus outbreak began.
Brent crude, the international benchmark, was up more than 5 per cent at $34.47 a barrel.
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The global number of new daily cases of Covid-19 held steady on Wednesday as 84,835 people were confirmed to have the virus. New daily cases in the US have remained around 30,000 for the past seven days, fuelling hopes that the spread of the virus is starting to plateau.
The market is desperately trying to embrace the positive sentiment associated with a flattening Covid-curve
Markets had been largely positive during the Asia-Pacific trading session on Thursday.
In Hong Kong the Hang Seng rose 1.4 per cent, while Sydney's S&P/ASX 200 index added 3.5 per cent and South Korea's Kospi was up 1.6 per cent. Japan's Topix dropped 0.6 per cent, ending a three-day run of gains.
Richard McGuire, a rates strategist at Rabobank, urged caution.
"Though the market is desperately trying to embrace the positive sentiment associated with a flattening Covid-curve, the reality is that the numbers are incredibly mixed and difficult to gauge as regards any firm and lasting improvement," he said.
Some of Wall Street's biggest banks have warned that while the interventions of central banks and governments have seen off the worst of the volatility, more problems may lie ahead.
"My concern is this relief rally might not be sustainable," said Mislav Matejka, global equity strategist at JPMorgan.
Written by: Philip Georgiadis in London, Thomas Hale in Hong Kong and Eric Platt and Matthew Rocco in New York
© Financial Times