NEW YORK/SINGAPORE-Global stocks have lost momentum after the sharpest rally since 2008 with investors bracing for a flurry of earnings reports that will provide clues on how severe a blow the COVID-19 outbreak has dealt to corporate America. Markets barometers in Japan and South Korea dropped more than 1.5 per cent on Monday, with the CSI 300 index of the biggest listed companies in Mainland China down 0.4 per cent. Trading in S&P 500 futures signalled a loss of around 0.6 per cent on Wall Street when trading resumes after a long weekend. The S&P 500 last week rose more than 12 per cent in the biggest rise since 1974. Most European markets were closed for Easter Monday.

Monday’s decline marks a stark contrast to last week, when MSCI’s broad measure of developed and emerging market stocks rallied 10 per cent in its biggest rise in almost 12 years. Line chart of MSCI All-World showing Global stock markets rebound after heavy fall Sentiment has been bolstered in recent days by signs of an “eagerly-awaited inflection in the viral curve,” said David Kostin, Goldman Sachs chief US equities strategist. Mr Kostin pointed to data showing the rate of growth in Covid-19 cases in New York was slowing, while several countries like hard-hit Italy and Spain had also seen a flattening in their epidemiological curves and are preparing to ease the lockdown measures that have strangled their economies. “These data points represented a major improvement,” said Mr Kostin.

Market attention has now begun to shift to first-quarter earnings season in the US, which is expected to provide a glimpse of how heavy a hit firms sustained as the Covid-19 crisis was gathering pace in the first three months of 2020. It will also give analysts and investors an opportunity to query executives on their outlook for coming months. The country’s biggest lenders, JPMorgan Chase, Bank of America, Citigroup and Wells Fargo, are all set to publish their quarterly accounts this week. They are typically considered bellwethers for the broader economy because of their central position in the financial system. Wall Street analysts have already over the past three months reduced their 2020 composite earnings per share estimates for the companies listed on the S&P 500 index by 15 per cent, according to FactSet data. Profits are now forecast to decline 8 per cent this year, which would mark the biggest fall since 2009 during the financial crisis. Column chart of Annual change in earnings per share (%) showing Analysts forecast sharp fall in Wall Street earnings this year Mr Kostin said further reductions could be on the horizon. “Concerned investors have focused on the fact that the first-quarter earnings season will inevitably lead to a wave of downward revisions to analyst estimates,” he said.

A decline in forecast earnings would prove problematic, Mr Kostin said, because it means investors would need to accept more stretched price-to-earnings valuations, or stock prices would need to fall further. The S&P 500 is down around 14 per cent for the year, having recovered over recent weeks from a sharper fall. Recommended Global economic growth Global economy already set for historic contraction In commodities, oil prices zigzagged after Saudi Arabia and Russia reached a deal to make the biggest production cuts on record. Brent crude was recently down 1.2 per cent, at $31.06 per barrel, having earlier climbed as high as $33.99.

US marker West Texas Intermediate ticked up 6 cents to $22.81, also surrendering the vast bulk of its gains. The choppy trade came after Opec+ producers agreed to remove almost 10m barrels per day from global supply. The cuts start from May and diminish in size before expiring in April 2022. The “problem is that Opec+ have taken too long to get to this point,” said Warren Patterson, head of commodities strategy at ING. “The issue is that we are seeing significant levels of demand destruction right now,” Mr Patterson added that there was “downside risk” to crude prices, given a global glut was likely to last through the second quarter, but that the deal could put a floor under Brent crude of about $25 per barrel.