Stocks surge as COVID-19 shows signs of peak but economy at risk of “vicious spiral”

Markets rose sharply on Monday.

The S&P 500 soared 7.0 percent, the STOXX Europe 600 jumped 3.7 percent and the Nikkei 225 surged 4.2 percent.

Markets rose amid signs that the spread of COVID-19 may be slowing.

“Signs that coronavirus may be peaking in parts of mainland Europe have given some hope that the economic hit will be short-lived,” said Russ Mould, investment director at AJ Bell.

US Vice President Mike Pence said “we’re starting to see glimmers of progress”.

However, oil prices plunged amid rising tensions between the world’s biggest oil producers over the weekend. West Texas Intermediate crude fell 8 percent and Brent fell 3.1 percent.

Some analysts see a bullish case for stocks. Bob Doll, chief equity strategist and senior portfolio manager at Nuveen, suggested that 2,192 was the bottom for the S&P 500, while Mike Wilson, Morgan Stanley’s chief equity strategist, said he does not expect a full retest of that low.

However, Peter Boockvar, chief investment officer at Bleakley Advisory Group, said that improvement in the rate of COVID-19 infections “does not signal the all clear” and is not confident that the botton has been hit.

Indeed, Scott Minerd, global chief investment officer at Guggenheim Partners, said that the S&P 500 could plunge to 1,500, while Mislav Matejka, head of global equity strategy at JP Morgan, warned of a possible “vicious spiral” in the economy that could result in a 10 percent decline in US real GDP.