The Fed has moved on from backstopping financial markets to helping support the real economy.

It will now lend against student loans, credit card loans and others, plus back loans to employers and a funding programme for small and medium businesses. In short, a package that could deliver $4 trillion to non-financial firms.

It also announced endless purchases of assets, including for the first time plans to buy municipal and corporate bonds. The reaction was mixed, though, with markets eventually closing lower on Monday.

The view may have been that, while the Fed cash injections will ensure financial market liquidity, they won’t stem the economic damage that’s underway.

This morning, there seems to have been a bit of reassessment. World stocks are 1% higher, U.S. equity futures are up 4% and European markets look similar.

One reason could be the news that China’s Hubei province, where the coronavirus pandemic originated, is lifting travel restrictions, raising hopes the Chinese economy can lead the world economy back toward better times. China’s blue-chip CSI300 index advanced 2.7%, its best day in three weeks.

Global bond yields have ticked up. Following a 20-basis-point slump yesterday, U.S. 10-year yields have inched higher. So two-year yields, which are now at seven-year lows.

On FX markets, the dollar has retreated against a basket of other currencies for the second consecutive day and is down more than 1% from the highs in the previous session. The euro and sterling are up more than 1%.

The Aussie dollar has rallied 2% and most EM currencies are up, too. Whether the rebound will last is another question. As Deutsche Bank’s Jim Reid put it this morning: “Markets are continuing to bounce up on the latest policy announcements and then sliding back down as the economic reality of the situation re-emerges.”

Meanwhile, we have an $80 billon economic rescue package from South Korea that lifted its shares 9%. There are signs of progress in the U.S. Congress on a $2 trillion fiscal stimulus package.

Brazil plans to inject $234 billion into the financial system and even Germany has agreed a 750 billion-euro package and is preparing to take on new debt for the first time since 2013.

And boy is it needed. Dire forecasts abound on the extent of economic damage. Goldman Sachs, for instance, expects the world economy to contract this year and predicts U.S. GDP will shrink 24% in the second quarter. Flash PMI surveys today for March –albeit already outdated — give us a picture of the devastation.

Japan posted its biggest-ever services decline and factory activity shrank at the fastest pace in a decade, signalling a 4% economic contraction this year.

The pain is exacerbated by the almost certain postponement of the Olympics, which Japan’s economic planners had pinned hopes on. Australia is a similarly awful picture; upcoming euro zone and U.S. data are likely to be just as bad.

Corporate profit warnings are coming thick and fast. Pernod Ricard is the latest, seeing a 20% hit to operating profit. Britain’s Travis Perkins said it will close all its businesses as the country goes into lockdown.

The cost of insuring against junk-rated companies defaulting on debt in Europe alone rose on Monday to eight year highs.

Among gainers, France’s Biomérieux won approval from the U.S. FDA for a product to test for coronavirus. And Nordex is seen rising after the German wind turbine maker forecast higher profits.

Interesting stat: The running aggregate already this year of dividend cancellations comes to £1.5 billion in the UK alone, stockbroker AJ Bell estimates.

Emerging-market stocks have rallied 4.3%, and the Fed’s pledge helped revive battered emerging currencies. The MSCI benchmark rose 0.6% — currencies such as Turkey’s lira, South Africa’s rand and Russia’s rouble are up 0.6% to 1.0%, lifted by the global picture as well as their own growth-boosting measures.

— A look at the day ahead from EMEA deputy markets editor Sujata Rao. The views expressed are her own —