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U.S. futures point higher as European markets rally.

After Wall Street’s worst trading day in more than three decades, U.S. futures surged on Friday and European indexes traded higher, in a sign of returning optimism.

S&P 500 futures jumped over 5 percent, hitting the “limit up” curb, which prevents further price movement until trading begins. Late Thursday, House Speaker Nancy Pelosi said that she and Treasury Secretary Steven Mnuchin had “resolved most of our differences” on a package of economic aid for workers and companies, pledging a House vote on Friday.

In Europe, Frankfurt’s DAX index and the CAC 40 in Paris were up more than 6 percent. London’s FTSE 100 jumped by more than 7 percent.

The price of oil crept up by 7 percent to $35.50 a barrel after getting pummeled in recent days. The yields on the 10-year U.S. Treasury also rose.

The volatility in markets this week reflects the increasing concern that governments and central banks may not be able to meaningfully mitigate the economic fallout from the spreading coronavirus.

On Thursday, Wall Street plunged nearly 10 percent, its biggest daily drop since the stock market crashed in 1987, as President Trump’s ban on the entry from most European countries to the United States disappointed investors who had been waiting for Washington to take stronger steps to bolster the economy.

Markets on Thursday recovered some gains only briefly after the Federal Reserve announced an injection of at least $1.5 trillion to banks, before ending the day firmly in a bear market — a term that signifies a decline of 20 percent from the most recent highs.

Asian indexes were hammered on Friday following the U.S. market plunge. Like Wall Street, every major financial market in Asia except for China is now firmly in bear market territory.

In Seoul, stocks finished the day down 3.4 percent. Regulators in South Korea halted the market for a second day as investors pushed it down by as much as 13 percent in early trading. After trading they announced a six-month ban on all short selling, essentially preventing traders from betting against any stock.

In Britain, regulators made a similar announcement: temporarily banning short selling on Italian and Spanish stocks trading in London, after regulators in Italy and Spain did the same to stem the market.

Hong Kong’s market fell by 1.1 percent. Even in Shanghai and Shenzhen, where the Chinese government often puts a floor on share drops, stocks dropped by more than 1 percent.

China adds its central bank firepower.

A market in Beijing. China’s economy was already struggling with its slowest growth in nearly three decades before the coronavirus hit. — Credit...Roman Pilipey/EPA, via Shutterstock

China’s central bank on Friday moved to free up money to help the country’s economy, joining a growing number of global policymakers worried about the impact of the fast-moving coronavirus.

The People’s Bank of China said it would inject $79 billion into its financial system, in a move that indicated Beijing remains concerned about its domestic economy after weeks of virtual shutdown.

The central bank eased the financial cushion it requires lenders to keep — cutting the so-called reserve ratio requirement by up to 1 percentage point for some banks — to loosen up money and encourage lending.

China’s economy was already struggling with its slowest growth in nearly three decades before the coronavirus hit, disrupting business and leading to the virtual shutdown of business across China for six weeks.

The bank said on Friday that the move was done “in order to support the development of the real economy” and reduce the cost of financing for businesses.

Thursday snapshot: Trump’s travel ban adds to investors’ distress.

Analysis: Something weird is happening on Wall Street

Underneath the alarming stock market figures, the financial world is signaling something unusual.

Bond prices and stock prices have moved together, not in opposite directions as they usually do. There were reports from trading desks that many assets that are normally liquid — easy to buy and sell — were freezing up, with securities not trading widely. That includes some Treasury bonds, which are usually easy to buy and sell and often represent a safe haven for investors.

All this suggests that major financial players are experiencing a cash crunch, and are selling whatever they can as a result. That would help explain the seeming contradiction of assets that should go up in value in a time of economic peril instead falling in value.

The volatility in markets in the last few weeks reflects the deep uncertainty about the near future of the world economy. But for now it is being compounded by something strange happening just beneath the surface, creating ripples like the ones that are evident in this tumultuous week.

The Fed intervenes after ‘highly unusual disruptions.’

The Federal Reserve Bank of New York responded on Thursday to increasingly fraught market conditions by announcing that it would offer at least $1.5 trillion worth of short-term loans to banks Thursday and Friday and change the structure of its asset purchase program.

The moves came as the markets for a variety of bonds — including usually easy-to-trade Treasuries — turned messier starting on Wednesday. Traders and strategists reported that markets were thin, and the gap between the prices buyers offered and those that sellers asked for was widening. At the same time, tremors had developed in funding markets, the plumbing of financial markets in which cash flows between banks, as fears over the coronavirus economic caused gyrations across Wall Street.

“These changes are being made to address highly unusual disruptions in Treasury financing markets associated with the coronavirus outbreak,” the New York Fed said in a statement.

Specifically, the central bank announced that it would offer $500 billion in a three-month repurchase operation Thursday afternoon. It also said that it would begin to buy government debt “across a range of maturities.” In recent months, it has been buying $60 billion a month only in short-term Treasury bills.

Analysts viewed the moves as warranted given funding constraints on Wall Street.

“This is a full-blown crisis response operation, intended to make it abundantly clear that the Fed will not allow liquidity to dry up,” Ian Shepherdson, chief economist at Pantheon Macroeconomics, wrote in a note.

Here’s what else is happening.

Berkshire Hathaway said it would not allow shareholders to physically attend its May 2 annual meeting in Omaha, Neb., which will be streamed online. All special events around the meeting were canceled.
“The Tonight Show Starring Jimmy Fallon” and “Late Night With Seth Meyers” will suspend production next week, NBC said Thursday, making them the biggest daily American television series to go dark because of concerns surrounding the coronavirus pandemic
Disney will close its theme parks worldwide starting this weekend, including Disney World in Florida and the Disneyland Resort in California. Disney Cruise Line will also close.

Reporting was contributed by Alexandra Stevenson, Cao Li, Amie Tsang, Carlos Tejada, Brooks Barnes and Katie Robertson.

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