Asia shares edge up, China factories show flicker of life

SYDNEY (Reuters) – Asian shares managed a tentative rally on Tuesday as factory data from China held out the hope of a rebound in activity even as other countries across the globe all but shut down.

China’s official manufacturing purchasing managers’ index (PMI) bounced to 52.0 in March, up from a record-low 35.7 in February and topping forecasts of 45.0.

Analysts cautioned the index could overstate the true improvement as it measures the net balance of firms reporting an expansion or contraction in activity.

If a company merely resumed working after a forced stoppage, it would read as an expansion without saying much about the overall level of activity.

Still, the headline number was a relief and helped MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rise 1.1%.

Japan’s Nikkei .N225 firmed 1.0% after a jittery start, while South Korea .KS11 added 2%.

E-Mini futures for the S&P 500 ESc1 added another 0.6%, supported by talk of book-keeping demand.

“It’s month-end rebalancing, whereby balanced funds now underweight equities versus fixed income given this month’s valuation destruction, need to buy stocks to get back into balance,” analysts at NAB said.

Healthcare had led Wall Street higher, with the Dow .DJI ending Monday up 3.19%, while the S&P 500 .SPX gained 3.35% and the Nasdaq .IXIC 3.62%. [.N]

News on the coronavirus remained grim but radical stimulus steps by governments and central banks have at least provided some comfort to economies.

Infections in hard-hit Italy slowed a little, but the government still extended its lockdown to mid-April. California reported a steep rise in people being hospitalized, while Washington state told people to stay at home.

Trade ministers from the Group of 20 major economies agreed on Monday to keep their markets open and ensure the flow of vital medical supplies.

OIL PRICES OVERWHELMED

Portfolio management also played a part in the forex market where many fund managers found themselves over-hedged on their U.S. equity holdings given the sharp fall in values seen this month, leading them to buy back dollars.

That saw the euro ease back to $1.1020 EUR=, from a top of $1.143 on Monday, while the dollar index bounced to 99.330, from a trough of 98.330. [USD/]

Month-end demand for dollars from Japanese funds saw the dollar inch up to 108.45 yen JPY=, though it remained some way from last week’s peak at 111.71.

Oil prices plunged to the lowest in almost 18 years on Monday as lockdowns for the virus squeezed demand even as Saudi Arabia and Russia vied to pump more product. [O/R]

In a new twist, U.S. President Donald Trump and Russian President Vladimir Putin agreed during a phone call on Monday to have their top energy officials meet to discuss slumping prices.

“However, the reality is that the level damage to demand is likely to overwhelm any production cut agreement between major producers,” wrote analysts at ANZ in a note.

“The lockdown of cities around the world and the shutdown of the aviation industry will cause a fall in demand the industry has never seen before.”

Prices did at least try and steady early Tuesday, with U.S. crude CLc1 up 56 cents to $20.64. Brent crude LCOc1 futures gained 19 cents to $22.95 a barrel.

In the gold market all the talk has been of a rush of demand for the physical product amid shortages in coins and small bars. Flows into gold-backed ETFs have ballooned by $13 billion so far this year, the most since 2004.

The metal was holding at $1,615 an ounce XAU=, well up from a low of $1,450 touched early in the month. [GOL/]

GRAPHIC: Asian stock markets : here

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Spain's coronavirus cases rise to 85,195, surpass China's

MADRID (Reuters) – Spain’s total number of coronavirus cases rose to 85,195 on Monday from 78,797 on Sunday, the country’s health ministry said, as the infections surpassed those reported in China, at 81,470 according to the latest data.

The death toll from the virus in Spain rose to 7,340 on Monday from 6,528 on Sunday, the ministry said.

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Asia shares rise on more stimulus hopes but dollar loses steam

TOKYO (Reuters) – Asian stocks rose on Friday as investors wagered policymakers will roll out more stimulus measures to combat the coronavirus pandemic after U.S. unemployment filings surged to a record.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 1.2%. Australian shares gave up gains to fall 1.09%, but Japan’s Nikkei rose 1.44%.

E-Mini futures for the S&P 500 reversed course and fell 0.95% in Asia following three consecutive days of gains in the S&P 500 on Wall Street.

The dollar nursed losses against major currencies as central banks’ steps to solve a dollar shortage in funding markets started to gain traction.

The U.S. House of Representatives is expected to pass a $2 trillion stimulus package later on Friday that will flood the world’s largest economy with money to stem the damage caused by the pandemic.

The U.S. Federal Reserve has already slashed rates to zero and launched quantitative easing. The Fed will also take the unprecedented step of offering a direct backstop for corporate loans.

The United States is now the country with the most coronavirus cases, surpassing even China, where the flu-like illness first emerged late last year. Policymakers may need to offer more stimulus as the virus slams the brakes on economic activity and increases healthcare spending.

“I’m not sure what measures are left, but the reaction in stocks shows some people hoping for more stimulus thought the market was a little oversold,” said Yukio Ishizuki, FX strategist at Daiwa Securities in Tokyo.

“Currencies tell a different story. The dollar is the lead actor. The mad rush to buy dollars due to liquidity concerns is starting to fade.”

The number of Americans filing claims for unemployment benefits surged to a record of more than 3 million last week as strict measures to contain the virus pandemic ground the country to a sudden halt, data showed on Thursday.

The jobless blowout was announced shortly after Fed Chairman Jerome Powell said the United States “may well be in recession”, an unusual acknowledgement by a Fed chair that the economy may be contracting even before data confirms it.

Global equity markets took the data in their stride, partly as most central banks have already aggressively eased policy and governments are backing this up with big fiscal spending.

Chinese shares, battered this month because of the virus, rose 0.8% on Friday. Shares in South Korea, another country hit hard by the pandemic, jumped by 1.62%.

Leaders of the Group of 20 major economies pledged on Thursday to inject over $5 trillion into the global economy to limit job and income losses from the coronavirus.

CURRENCY MARKET

In the currency market, the greenback fell 0.89% to 108.64 yen in Asia, on pace for a 2% weekly decline.

The dollar was also headed for weekly declines against the Swiss franc, pound, and euro.

The U.S. currency’s fall after two weeks of gains suggests that the Fed’s efforts to relieve a crunch in the dollar funding market are working, some analysts said.

The yield on benchmark 10-year Treasury notes rose slightly in Asia to 0.8160%, while the two-year yield edged up to 0.2809%.

Yields were still headed for a weekly decline, taking cues from the Fed’s extraordinary steps to bolster markets and the $2 trillion stimulus package.

U.S. crude ticked up 2.08% to $23.07 a barrel. Brent rose 1.14% to $26.64 per barrel. Energy markets have been caught in a tug-of-war between hopes for stimulus spending and worries about excess oil supplies.

Gold, normally bought as a safe haven, was slightly lower. Spot gold fell 0.44% to $1,626.16 per ounce.

Gold market participants remained concerned about a supply squeeze after a sharp divergence between prices in London and New York. The virus has grounded planes used to transport gold and closed precious metal refineries.

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Asian stocks scratch gains but lose steam on U.S. job jitters

SINGAPORE (Reuters) – Asian stocks eked out gains on Thursday, but the week’s rally lost steam as investors seemed torn between relief at the agreement of a huge U.S. stimulus package and dread over a likely spike in jobless claims and coronavirus cases.

After last-minute negotiations, the Senate backed a $2 trillion bill aimed at helping workers and industries hurt by the pandemic. Yet concern has already turned to whether that will be enough to cushion a heavy economic blow.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 1.3% but regional performances were patchy.

The Nikkei snapped three days of gains with a 3.5% drop, while Australia’s benchmark rose for a third day – its longest winning streak in six weeks.

Currency markets also hinted at the sense of uneasiness – the risk-exposed Australian dollar sank, the safe haven yen rose, but so too did many emerging market currencies.

Oil fell and U.S. and European stock futures turned red after bobbling into positive territory during the session. E-mini futures for the S&P 500 last traded down 1% and EuroSTOXX 50 futures were down 1.4%.

“After this crazy three weeks of trading we are now coming to a more static state,” said Margaret Yang, market analyst at brokerage CMC Markets in Singapore. “Bulls and bears are fighting each other, with equal strength.”

Global markets have lost about a quarter of their value in the last six weeks of virus-driven selling.

The passage of the stimulus bill through the Senate, as expected, brushed Asian indexes slightly higher but gains were marginal and ephemeral. The Hang Seng and Shanghai Composite soon returned to negative territory.

The package will now head to the House of Representatives, which could vote sometime this week. Before that will come a glimpse of the scale of economic destruction already wrought.

Initial jobless claims in the United States are due at 1230 GMT, with forecasts in a Reuters poll ranging from 250,000 claims all the way up to 4 million.

RBC Capital Markets economists had expected a national figure over 1 million, but say “it is now poised to be many multiples of that,” as lockdowns drive deep layoffs.

“Something in the 5-10 million range for initial jobless claims is quite likely,” they wrote in a note. That compares to a 695,000 peak in 1982.

Citi Private Bank said the peak total could reach 15-18% of the total U.S. workforce, some 25 million people.

U.S. Federal Reserve Chairman Jerome Powell is also due to appear on NBC television around 1100 GMT.

‘WE DON’T KNOW HOW BAD IT COULD BE’

The money at stake in the stimulus bill amounts to nearly half of the $4.7 trillion the U.S. government spends annually.

But it comes against a backdrop of bad news as the coronavirus spreads and more signs of economic damage.

“There has been so much stimulus thrown at this,” said Jun Bei Liu, portfolio manager at Tribeca Investment Partners in Sydney. “But the positivity related to it is really just sentiment,” she said. “We don’t know how bad it could be.”

Dire data from Singapore offered the latest clue, with the economy suffering its biggest contraction in a decade in the first quarter and factories posting their largest output drop since records began in 1983.

Tokyo’s governor asked residents to avoid going out and to “act with a sense of crisis”. Spain’s coronavirus death toll has overtaken China’s and more than 21,000 people have died globally.

In currencies, the mood drove weakness in both the U.S. dollar and the riskier Aussie.

The Australian dollar was last down 0.6% at $0.5924 and 1% weaker on the rising yen.

The safe-haven yen rose 0.4% to 110.70 per dollar and the softer greenback buoyed emerging market currencies, with MSCI’s emerging markets currencies index touching a one-week high.

Oil edged lower with fears of plunging demand just outweighing stimulus hopes. U.S. crude futures slipped 30 cents to$24.19 per barrel and Brent crude futures fell 0.5% to $27.26.

Gold fell 0.7% to $1,602.00 per ounce.

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Spain registers more than 700 deaths from coronavirus overnight

MADRID (Reuters) – Spain registered 738 fatalities from the coronavirus over the past 24 hours in the steepest increase of the death toll since the epidemic hit the country, the health ministry reported on Wednesday.

The number of reported deaths from the virus rose to 3,434 from 2,696 on Tuesday, the ministry said. The overall number of cases soared to 47,610 from 39,673 on Tuesday.

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Stocks plunge as Fed's emergency rate cut fails to calm panic

SYDNEY (Reuters) – Stock markets and the dollar fell heavily on Monday, after emergency rate cuts in the United States and New Zealand failed to allay fears about the coronavirus’ economic shock.

U.S. stock futures hit their downlimit before daybreak in Singapore. The dollar sank more than 2% against the yen.

Nikkei futures fell 6%. Australia’s benchmark stock index fell 7% in the first quarter-hour of trade. U.S. crude fell 5% to under $30 per barrel.

The U.S. Federal Reserve cut interest rates by 100 basis points on Sunday to a target range of 0% to 0.25%. It said it would expand its balance sheet by at least $700 billion in coming weeks.

“(The) market is wondering what the Fed knows that the rest of us don’t,” said Phil Orlando, chief equity market strategist at Federated Hermes in New York.

“Is COVID-19 an even bigger deal than we think?”

New Zealand’s central bank also slashed interest rates by 75 basis points, sinking the country’s currency, as it prepared for a “significant” hit to the economy.

U.S. Treasuries futures jumped more than a full point.

E-mini futures for the S&P 500 index dropped 4.77% to their daily trading limit outside the United States.

Lockdowns and travel bans spread across the globe over the weekend, affecting tens of millions of people.

“(The Fed) must really be scared. To do that in one fell swoop is really quite shocking,” said Robert Pavlik, chief investment strategist at Slatestone Wealth LLC in New York.

“They pulled out whatever weapons they had and my sense is I think it may help initially but I don’t think it goes much further because this is still a developing issue. They used up basically all their ammunition and we’re down to sticks and stones.”

Five other central banks also cut pricing on their swap lines to make it easier to provide dollars to their financial institutions facing stress in credit markets.

The swap lines were set up by the Fed, the Bank of Canada, European Central Bank, Bank of England, Bank of Japan and Swiss National Bank in the financial crisis. They also agreed to offer three-month credit in U.S. dollars on a regular basis and at a rate cheaper than usual.

The move was designed to bring down the price banks and companies pay to access U.S. dollars, which has surged in recent weeks as the pandemic spooked investors.

U.S. President Donald Trump called the move “terrific” and “very good news.”

Along with the New Zealand cut, and Australia’s central bank poured $3.6 billion in liquidity into Australia’s financial system.

“Central banks around the world continue to react with emergency interest rate cuts to assist with the shock to demand arising from the spread of the COVID-19 virus, with necessary public health containment efforts coming at a substantial economic cost,” NAB chief economist Alan Oster.

“Central banks are also appropriately providing additional liquidity to financial systems.”

In currency markets, the dollar dropped 1.7% on the Japanese yen to 106.01, while the euro climbed 0.5% to $1.1168.

The risk-sensitive Australian dollar fell 0.25% to $0.6182 while the New Zealand dollar slipped 0.1% to $0.6048. Oil prices fell about 5% and gold rose.

Brent crude dropped $1.80 to $32.03 per barrel.[O/R]

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World markets plunge deepens as virus panic worsens

SINGAPORE (Reuters) – Asia’s stock markets crashed on Friday as panic gripping world financial markets deepened, and even haven assets such as gold and bonds were ditched to cover losses in the wipeout.

Japan’s Nikkei .N225 was in freefall, dropping 10% and heading for its worst week since the 2008 financial crisis. Not one stock on the index is in positive territory. [.T]

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS fell 2% and is down 12.8% this week.

Australia’s benchmark fell 7.6% and is set for its worst week on record, while in South Korea the won was shredded and the Kosdaq .KQ11 fell 8%, triggering a short trading halt.

Hong Kong’s Hang Seng index .HSI fell 6.8%, its steepest drop since 2008. China’s Shanghai composite .SSEC fell 4%.

Currency markets steadied somewhat after furious dollar buying overnight, as fears of systemic risks drive demand for the world’s reserve currency. [FRX/]

Even after its worst crash since Black Monday in 1987 overnight, Dow futures YMc1 are down about 0.8% in Asia and S&P 500 futures ESc1 are off 0.4%. [.N]

“There is a sense of fear and panic,” said James Tao, an analyst at stockbroker Commsec in Sydney, where phones at the high-value client desk rang non-stop.

“It’s one of those situations where there is so much uncertainty that no-one quite knows how to respond…if it’s fight or flight, many people are choosing flight at the moment.”

The plunge, as the coronavirus pandemic spreads, gathered pace after U.S. President Donald Trump spooked investors with a move to restrict travel from Europe, and after the European Central Bank disappointed markets by holding back on rate cuts.

Trade was halted on the S&P 500 .SPX. after it hit downdraft circuit breakers. It fell further when trade resumed, eventually losing 9.5% to close 27% below February’s peak.

Gold XAU=, usually a safe harbour in times of panic, fell 3.5%, yields on long-dated U.S. Treasuries shot up – where they mostly held on Friday. [US/] [GOL/]

“Wherever anyone has any risk, people just want to bring risk back to flat at the moment, that’s what happening,” said Stuart Oakley, Nomura’s global head of flow FX in Singapore

“This is what happens when you get what’s known as a value-at-risk shock, where people have drawn down so much P&L that they just need to draw down all risk.”

The VIX volatility index – Wall Street’s “fear gauge” – and an equivalent measure of volatility for the Euro Stoxx 50 .V2TX hit their highest since the 2008 financial crisis.

TRUMP, ECB UNDERWHELM

In a televised address late on Wednesday, U.S. President Donald Trump imposed restrictions on travel from Europe to the United States, shocking investors and travellers.

Traders were disappointed after hoping to see broader measures to fight the spread of the virus and blunt its expected blow to economic growth.

The New York Federal Reserve surprised by pumping huge amounts of cash into the banking system, aiming to head off the sort of dislocation that saw markets seize up during the financial crisis more than a decade ago.

After adding $500 billion on Thursday, it will inject another $1 trillion today in an effort to stop borrowing costs from rising. Australia’s central bank injected an unusually large $5.5 billion into the financial system on Friday.

In early Asia currency trade, the dollar did its best to hold gains against most major currencies after a blowout in swap spreads showed investors are facing a greenback shortage.

The euro EUR= found footing at $1.1178 after falling as far as $1.1054 overnight. The Australian dollar AUD=D3 lifted about 1% from an 11-year low to $0.6293.

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World shares trampled in coronavirus panic, oil prices plunge

SYDNEY (Reuters) – Global share markets tumbled on Monday as panicked investors fled to bonds to hedge the economic shock of the coronavirus, and oil plunged more than 20% after Saudi Arabia slashed its official selling price.

Investors drove 30-year U.S. bond yields beneath 1% as they wagered the Federal Reserve would be forced to cut interest rates by at least 75 basis points at its March 18 meeting, despite only just having delivered an emergency easing.

The safe-haven yen surged across the board as emerging market currencies with exposure to oil, including the Russian rouble and Mexican peso, tumbled.

Saudi Arabia had stunned markets with plans to raise its production significantly after the collapse of OPEC’s supply cut agreement with Russia, a grab for market share reminiscent of a drive in 2014 that sent prices down by about two thirds.[O/R]

Brent crude LCOc1 futures slid $11.14 to $34.13 a barrel in chaotic trade, while U.S. crude CLc1 shed $10.58 to $30.70.

“Today’s price action puts at risk the fiscal health of the vast majority of sovereign producers and budget cuts and increased debt loads are now looming in the event of a prolonged period of low prices,” warned Helima Croft, head of global commodity strategy at RBC Capital Markets.

“For the most politically and economically fragile producer states, the reckoning could be severe.”

There were also worries that U.S. oil producers that had issued a lot of debt would be made uneconomic by the price drop.

Energy stocks took a beating and E-Mini futures for the S&P 500 ESc1 dived 4.89% to be limit down. EUROSTOXXX 50 futures STXEc1 fell 5.7% and FTSE futures FFIc1 6.9%. [.N]

Japan’s Nikkei .N225 fell 5.7% and Australia’s commodity-heavy market 5.9%.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS lost 3.7% in its worst day since late 2015, while Shanghai blue chips .CSI300 dropped 2.2%.

Not helping the mood was news North Korea had fired three projectiles off its eastern coast on Monday.

“The scale of the collapse shows that any hopes of a temporary respite were in vain,” said Sean Callow, a senior FX strategist at Westpac. “The notion that overweight equities is the only real option in a world of super-low rates now seems to be from ‘The Time Before’.

“U.S. officials have barely moved beyond platitudes about ‘strong fundamentals’ so there is surely plenty more room for markets to price in major damage to the economy.”

The number of people infected with the coronavirus topped 107,000 across the world as the outbreak reached more countries and caused more economic carnage.

Italy’s markets are sure to come under fire after the government ordered a lockdown of large parts of the north of the country, including the financial capital Milan.

“After a week when the stockpiling of bonds, credit protection and toilet paper became a thing, let’s hope we start to see some more clarity on the reaction,” said Martin Whetton, head of bond & rates strategy at CBA.

“Dollar bloc central banks cut policy rates by 125 basis points, not as a way to stop a viral pandemic, but to stem a fear pandemic,” he added, while noting many had little scope to ease further.

BOND BUBBLE

A seismic shift saw markets <0#FF:> fully price in an easing of 75 basis points from the Fed on March 18, while a cut to near zero was now seen as likely by April.

The European Central Bank meets on Thursday and will be under intense pressure to act, but rates there are already deeply negative.

“The onus is falling, perhaps inevitably on the actions of governments to abandon budget surpluses and reinvigorate the demand side of the economy,” said Whetton.

Urgent action was clearly needed with data suggesting the global economy toppled into recession this quarter. Figures out from China over the weekend showed exports fell 17.2% in January-February, from a year earlier.

Analysts at BofA Global Research estimated the latest sell-off had seen $9 trillion in global equity value vaporized in nine days, while the average 10-year yield in the developed world hit 16 basis points, the lowest in 120 years.

“The clearest outcome of the exogenous COVID-19 shock is a collapse in bond yields, which once panic fades can induce huge rotation to ‘growth stocks’ and ‘bond proxies’ in equities,” they wrote in a client note.

Yields on 10-year U.S. Treasuries US10YT=RR plunged to a once-unthinkable 0.48%, having halved in just three sessions.

Yields on the 30-year long bond US30YT=RR dived 35 basis points on Friday alone, the largest daily drop since the 1987 crash, and slid under 1% on Monday to reach 0.96%.

Related Coverage

  • Analyst View: Oil price plunge, coronavirus fears unleash market chaos

The fall in yields and Fed rate expectations has pulled the rug out from under the dollar, sending it crashing to the largest weekly loss in four years =USD. [USD/]

The dollar extended its slide in Asia to as far as 101.60 yen JPY=, depths not seen since late 2016. It was last down 3.1% at 101.97 in wild trade. The euro likewise shot to the highest in over 13 months at $1.1492 EUR=.

Gold jumped 1.6% to clear $1,700 per ounce XAU= and reach a fresh seven-year peak. [GOL/]

Source: Read Full Article

Shares sunk by coronavirus panic, oil prices plunge

SYDNEY (Reuters) – Asian shares sank in a sea of red on Monday as panicked investors fled to bonds to hedge the economic shock of the coronavirus, and oil plunged more than 20% after Saudi Arabia slashed its official selling price.

The world’s top oil exporter plans to raise its production significantly after the collapse of OPEC’s supply cut agreement with Russia, a grab for market share reminiscent of a drive in 2014 that slashed prices by about two thirds.[O/R]

Brent crude LCOc1 futures slid $9.39 to $35.88 a barrel in chaotic trade, while U.S. crude CLc1 shed $8.77 to $32.51.

The safe-haven yen surged against emerging market currencies with exposure to oil, including the Russian rouble and Mexican peso, as analysts saw danger ahead.

“Today’s price action puts at risk the fiscal health of the vast majority of sovereign producers and budget cuts and increased debt loads are now looming in the event of a prolonged period of low prices,” warned Helima Croft, head of global commodity strategy at RBC Capital Markets.

“For the most politically and economically fragile producer states, the reckoning could be severe.”

There were also worries that U.S. oil producers that had issued a lot of debt would be made uneconomic by the price drop.

Energy stocks took a beating and E-Mini futures for the S&P 500 ESc1 tumbled 4.6% having been limited down at one stage. EUROSTOXXX 50 futures STXEc1 fell 4.4% and FTSE futures FFIc1 4.8%. [.N]

Japan’s Nikkei .N225 fell 4.7% and Australia’s commodity-heavy market 5%. MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS lost 3.0% to a five-month low, while Shanghai blue chips .CSI300 dropped 2.1%.

Not helping the mood was news North Korea had fired three projectiles off its eastern coast on Monday.

“The scale of the collapse shows that any hopes of a temporary respite were in vain,” said Sean Callow, a senior FX strategist at Westpac. “The notion that overweight equities is the only real option in a world of super-low rates now seems to be from ‘The Time Before’.

“U.S. officials have barely moved beyond platitudes about ‘strong fundamentals’ so there is surely plenty more room for markets to price in major damage to the U.S. economy.”

The number of people infected with the coronavirus topped 107,000 across the world as the outbreak reached more countries and caused more economic carnage.

Italy’s markets are sure to come under fire after the government ordered a lockdown of large parts of the north of the country, including the financial capital Milan.

“After a week when the stockpiling of bonds, credit protection and toilet paper became a thing, let’s hope we start to see some more clarity on the reaction,” said Martin Whetton, head of bond & rates strategy at CBA.

“Dollar bloc central banks cut policy rates by 125 basis points, not as a way to stop a viral pandemic, but to stem a fear pandemic,” he added, while noting many had little scope to ease further.

BOND BUBBLE

Markets are fully priced for at least a half-point rate cut from the Federal Reserve at its scheduled policy meeting on March 18, following last week’s emergency easing, and a move toward zero not long after. <0#FF:>

The European Central Bank meets on Thursday and will be under intense pressure to act, but rates there are already deeply negative.

“The onus is falling, perhaps inevitably on the actions of governments to abandon budget surpluses and reinvigorate the demand side of the economy,” said Whetton.

Urgent action was clearly needed with data suggesting the global economy toppled into recession this quarter. Figures out from China over the weekend showed exports fell 17.2% in January-February, from a year earlier.

Analysts at BofA Global Research estimated the latest sell-off had seen $9 trillion in global equity value vaporised in nine days, while the average 10-year yield in the developed world hit 16 basis points, the lowest in 120 years.

“The clearest outcome of the exogenous COVID-19 shock is a collapse in bond yields, which once panic fades can induce huge rotation to ‘growth stocks’ and ‘bond proxies’ in equities,” they wrote in a client note.

Yields on 10-year U.S. Treasuries US10YT=RR plunged to a once-unthinkable 0.50%, having halved in just three sessions.

Yields on the 30-year long bond US30YT=RR dived 35 basis points on Friday alone, the largest daily drop since the 1987 crash, and briefly traded under 1% on Monday.

Related Coverage

  • Analyst View: Oil price plunge, coronavirus fears unleash market chaos

The fall in yields and Fed rate expectations has pulled the rug out from under the dollar, sending it crashing to the largest weekly loss in four years =USD. [USD/]

The dollar extended its slide in early Asia to reach 103.55 yen JPY=, depths not seen since late 2016, while the euro shot to the highest in over eight months at $1.1387 EUR=.

Gold jumped 1.6% to clear $1,700 per ounce XAU= and reach a fresh seven-year peak. [GOL/]

Source: Read Full Article

Asian shares slammed in panicked trade, oil prices crash

SYDNEY (Reuters) – Asian shares were set for a pounding on Monday as investors fled to bonds to hedge the economic shock of the coronavirus, and oil plunged more than 20% after Saudi Arabia slashed its official selling price.

The world’s top oil exporter plans to raise its production significantly after the collapse of OPEC’s supply cut agreement with Russia, a grab for market share reminiscent of a drive in 2014 that caused prices to slump around two thirds.

Brent crude futures sank $9.51 to $35.76 a barrel in chaotic trade, while U.S. crude shed $8.81 to $32.47.

The safe-haven yen surged against emerging market currencies with exposure to oil, including the Russian rouble and Mexican peso, as analysts saw danger ahead.

“Today’s price action puts at risk the fiscal health of the vast majority of sovereign producers and budget cuts and increased debt loads are now looming in the event of a prolonged period of low prices,” warned Helima Croft, head of global commodity strategy at RBC Capital Markets.

“For the most politically and economically fragile producer states, the reckoning could be severe.”

There were also worries that U.S. oil producers that had issued a lot of debt would be made uneconomic by the price drop.

Energy stocks were certain to the be slammed, with E-Mini futures for the S&P 500 already down 4.1%. Nikkei futures dived 4.4% and were trading 1,200 points below the cash close on Friday.

Futures for the U.S. 10-year Treasury note jumped more than a full point, pointing to record lows for yields.

The number of people infected with coronavirus topped 107,000 across the world as the outbreak reached more countries and caused more economic damage.

Italy’s markets could come under intense pressure after the government ordered a lockdown of large parts of the north of the country, including the financial capital Milan.

“After a week when the stockpiling of bonds, credit protection and toilet paper became a thing, let’s hope we start to see some more clarity on the reaction,” said Martin Whetton, head of bond & rates strategy at CBA.

“Dollar bloc central banks cut policy rates by 125 basis points, not as a way to stop a viral pandemic, but to stem a fear pandemic,” he added, while noting many had little scope to ease further.

BOND BUBBLE

Markets are fully priced for another half-point rate cut from the Federal Reserve at its scheduled policy meeting on March 18, following last week’s emergency easing, and a move toward zero in coming months.

“The onus is falling, perhaps inevitably on the actions of governments to abandon budget surpluses and reinvigorate the demand side of the economy,” said Whetton.

Urgent action was clearly needed with data suggesting the global economy slid into recession this quarter. Figures out from China over the weekend showed exports fell 17.2% in January-February, from a year earlier.

Analysts at BofA Global Research estimated the latest sell-off had seen $9 trillion in global equity value vaporized in nine days, while the average 10-year yield in the developed world hit 16 basis points, the lowest in 120 years.

“The clearest outcome of the exogenous COVID-19 shock is a collapse in bond yields, which once panic fades can induce huge rotation to ‘growth stocks’ and ‘bond proxies’ in equities,” they wrote in a client note.

Yields on 10-year U.S. Treasuries plunged to a once-unthinkable 0.71%, having halved in just eight sessions. Yields on the 30-year long bond dived 35 basis points on Friday, the largest daily drop since the 1987 crash.

The tumble in yields and Fed rate expectations has pulled the rug out from under the dollar, sending it crashing to the largest weekly loss in four years.

The dollar extended the slide in early Asia to reach 103.55 yen, depths not seen since late 2016, while the euro shot to the highest in over eight months at $1.1387.

Gold climbed 1.3% to $1,695.70 per ounce to reach a fresh seven-year peak.

GRAPHIC: Asian stock markets – here

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