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Business

Hong Kong tensions unnerve world stock markets, oil tumbles

NEW YORK/LONDON (Reuters) – Oil prices tumbled and global equity markets wavered on Friday as China’s move to impose a new security law on Hong Kong further strained U.S.-Sino relations and clouded economic recovery prospects.

News that China also dropped its annual growth target for the first time added to uncertainty about fallout from the COVID-19 pandemic, boosting safe-haven investments such as U.S. Treasuries US10YT=RR and the dollar.

China said it would impose new national security legislation on Hong Kong, leading U.S. President Donald Trump to warn that Washington would react “very strongly” against any attempt to gain more control over the former British colony.

Emerging market shares slid -2.72%. But stocks in Europe closed mostly flat and on Wall Street traded mixed to higher as investors prepared for a long weekend in the United States, the UK and elsewhere.

After trading lower most of the session, Wall Street trended upward in late trading.

“The market just keeps battling higher, it just wants to go higher,” said Tim Ghriskey, chief investment strategist at Inverness Counsel in New York. “It’s anticipating improvement and we’ve seen all the bad news.”

Tensions between the world’s two largest economies have risen in recent weeks, with Washington ramping up criticism of China over the origins of the pandemic, raising fears the rhetoric could crimp economic growth.

“You have these doubts over China that is triggering this sell-off in oil, and it’s going to gain steam. If oil sells off, it’s hard to have a strong stock market,” said Ed Moya, senior market analyst at OANDA in New York.

Of major asset classes, crude oil has rebounded the most off the year’s lows on hopes world economies will soon recover from coronavirus-induced business shutdowns, he said, addin that he believed oil’s rally was overdone.

“There’s just too much uncertainty, and that’s going to likely keep on weighing on risk appetite,” Moya said.

MSCI’s all-country world stock index .MIWD00000PUS shed 0.48%, while the pan-European STOXX 600 index lost 0.03%.

On Wall Street, the Dow Jones Industrial Average .DJI fell 42.39 points, or 0.17%, to 24,431.73. The S&P 500 .SPX gained 2.67 points, or 0.09%, to 2,951.18 and the Nasdaq Composite .IXIC added 27.73 points, or 0.3%, to 9,312.61.

Earlier in Asia, Hong Kong’s Hang Seng index .HSI slid more than 5% to a seven-week low, its biggest daily percentage fall since 2015. MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS lost 2.7%; Japan’s Nikkei .N225 fell 0.8%.

Analysts said extensive central bank stimulus continues to underpin sentiment and buoy equity markets.

Japan’s central bank unveiled a lending program to channel nearly $280 billion to small businesses hit by the coronavirus. India slashed rates for a second time this year and the European Central Bank, in the minutes from its last meeting, said it was ready to expand emergency bond purchases as early as June.

U.S. crude CLc1 fell 67 cents to settle at $33.25 a barrel, paring about half earlier losses of more than 5%.

Brent LCOc1 settled at $35.13, down 93 cents on the day.

The dollar index =USD rose 0.33%, with the euro EUR= down 0.43% to $1.0902. The Japanese yen JPY= strengthened 0.05% versus the greenback at 107.57 per dollar.

Benchmark 10-year U.S. Treasury yields fell 2.4 basis points to 0.6526% US10YT=RR. Spot gold XAU= added 0.6%.

U.S. gold futures GCv1 settled up 0.8% at $1,735.50 an ounce.

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Economy

BOJ has no preset idea on when to normalise ETF buying pace – senior official

TOKYO, May 12 (Reuters) – The Bank of Japan has no preset idea now on when it would slow its purchases of exchange-traded funds (ETF) back to normal, a senior central bank official said on Tuesday.

As part of its monetary easing steps decided in March, the BOJ pledged to double the annual pace of ETF buying to 12 trillion yen ($111.65 billion) as a temporary measure to stabilise markets jolted by the coronavirus pandemic.

The BOJ holds roughly 5-6% of the country’s shares through its ETF purchases, which had a book value of around 30 trillion yen as of end-March, Shinichi Uchida, an executive director at the central bank, told parliament. ($1 = 107.4800 yen) (Reporting by Leika Kihara Editing by Chang-Ran Kim)

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World News

Former Japan diplomat Yukio Okamoto, adviser to premiers, dies from coronavirus

TOKYO (Reuters) – Former Japanese diplomat Yukio Okamoto, a one-time adviser to prime ministers and expert on ties with the United States, died late last month after contracting the novel coronavirus, his consultancy confirmed on Friday.

After retiring from the foreign ministry in 1991, Okamoto, 74, served as an adviser to then-prime minister Ryutaro Hashimoto on thorny issues related to Okinawa, home to the bulk of U.S. troops in Japan.

He also advised then-prime minister Junichiro Koizumi from 2001-2004 and was a research fellow at the Massachusetts Institute of Technology’s Center for International Studies.

In comments to public broadcaster NHK, former U.S. defence official Richard Armitage called Okamoto a “giant” among those involved in U.S.-Japan affairs and a true patriot.

“This is a shock. And from the coronavirus!” said Tokyo Governor Yuriko Koike in a tweet.

“I received accurate analysis from a global perspective about international politics, trade wars and the like, from a diplomat who was full of Japanese spirit,” Koike said, offering her condolences.

A well-known commentator who often appeared on TV, Okamoto was head of a political and economic consultancy.

Japan has not had the explosive surge of coronavirus infections seen in many countries, but as of Friday midday, it had more than 15,500 confirmed cases including 590 deaths, NHK said.

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World News

Japan declares nationwide state of emergency

A nationwide state of emergency has been declared in Japan due to the country’s worsening coronavirus outbreak.

The move allows regional governments to urge people to stay inside, but without punitive measures or legal force.

The state of emergency will remain in force until 6 May.

Prime Minister Shinzo Abe had previously declared a month-long state of emergency in seven regions.

Speaking at a special meeting of medical experts, Mr Abe said: “Areas where a state of emergency should be carried out will be expanded from the seven prefectures to all prefectures.”

As the number of infections in Japan has increased, criticism of Mr Abe’s response has grown louder.

One poll shows 75% of people think the prime minister took too long to declare a state of emergency in Tokyo.

After a recent spike in cases in the capital Tokyo, experts warned that the city’s emergency medical facilities could collapse under the pressure. Officials in Tokyo have also urged people to work from home.

After the initial state of emergency came into force on 8 April, a number of other regional governors called for the measures to be extended to their areas, saying that cases were growing and their medical facilities were overwhelmed.

Japan’s two emergency medical associations also issued a joint statement warning that they were “already sensing the collapse of the emergency medical system”.

And the mayor of Osaka appealed for people to donate their raincoats, so they could be used as personal protective equipment (PPE) for health workers whom he said were being forced to fashion PPE out of rubbish bags.

How has Japan responded to the outbreak?

Despite recording its first case more than three months ago, Japan is still only testing a tiny percentage of the population, the BBC’s Tokyo correspondent Rupert Wingfield-Hayes reports.

Unlike South Korea – which has brought its outbreak largely under control through a programme of large-scale testing – the Japanese government said that carrying out widespread testing was a “waste of resources”.

The health ministry fears that hospitals could be overwhelmed by people who test positive, but only have mild symptoms.

Testing is also governed by local health centres, not on the national government level – and some of these local centres are not equipped to carry out testing on a major scale.

Hokkaido became the first region in Japan to declare a state of emergency due to the coronavirus in late February, and lifted the state of emergency on 19 March. However, it was re-imposed this week because of a second wave of infections.

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Economy

Most JGBs gain as dismal U.S. data stokes fear of deep economic downturn

April 16 (Reuters) – Japanese government bond (JGB) prices mostly edged higher on Thursday, tracking overnight moves in U.S. Treasuries, as dismal economic data from the United States stoked fears of a deep economic downturn.

Benchmark 10-year JGB futures rose 0.22 points to 152.35, with a trading volume of 10,262 lots.

The key 10-year cash JGB yield fell 1.5 basis points to zero percent.

At the shorter end of the market, the five-year debt yield dropped 1.5 basis points to minus 0.115%, while the two-year yield stood flat at minus 0.160%.

In the super-long zone, the 20-year and the 40-year yields lost half a basis point each to 0.340% and 0.475%, respectively, while the 30-year debt yield added half a basis point to 0.465%.

U.S. Treasury yields fell across the board on Wednesday as risk aversion flared up after fresh economic data showed the coronavirus outbreak decimating U.S. consumer demand and manufacturing activity.

In further evidence of economic damage from the pandemic, U.S. retail sales fell the most on record last month, while manufacturing output fell by the most in 74 years, raising fears of a deep recession. (Reporting by Tokyo Markets Team; Editing by Ramakrishnan M.)

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World News

U.S. Forces Japan extends health emergency to all of Japan

TOKYO (Reuters) – U.S. Forces Japan on Wednesday extended the public health emergency for its military bases to all of Japan, where there has been a steady increase in new coronavirus infections and the government has declared a state of emergency for major population areas.

The U.S. military’s previous declaration covered only the eastern Kanto region.

The public health emergency will remain in effect until May 15 and gives commanders the authority to enforce compliance with health protection measures for anyone with access to U.S. facilities, U.S. Forces Japan said in a statement.

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Economy

JGBs dip after U.S. bonds sag on hopes of pandemic peak

TOKYO, April 14 (Reuters) – Japanese government bond prices edged lower on Tuesday after U.S. bond prices sagged on optimism that the coronavirus epidemic in the United States is nearing its peak.

Benchmark 10-year JGB futures dipped 0.04 point to 152.22, but trade has remained slow with volume reaching just 6,400 lots, about a quarter of the average since last year.

Some market players link the low trading volumes to the increase in the number of market players working from home.

The 10-year JGB yield edged up 0.5 basis point to 0.005%, while the 20-year yield rose 1.5 basis points to 0.340%.

The 30-year and 40-year yield also rose 1 basis point each to 0.455% and 0.475% respectively.

U.S. bonds yields rose a tad on Monday on rising hopes about re-opening the economy after weeks of restrictions to fight the virus. New York Governor Andrew Cuomo said the worst may be over for his state in terms of the pandemic. (Reporting by Tokyo Markets Team, Editing by Sherry Jacob-Phillips)

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Economy

JGBs tick down on last day of fiscal year, weighed down by debt issuance worries

TOKYO, March 31 (Reuters) – Japanese government bond prices dipped on Tuesday, the last day of the Japanese financial year, weighed down by worries about a probable increase in government debt issuance to finance its massive stimulus.

Government sources told Reuters on Monday that Japan will boost government bond issuance by 16 trillion yen ($148 billion)in the next fiscal year starting from April to fund a massive stimulus package aimed at combating the hit to the economy from the coronavirus pandemic.

The government will increase issuance for JGBs of all maturities excluding 40-year bonds, inflation-linked bonds and liquidity-supplying bonds, and the increase is likely to start from July, they said.

But the losses were mitigated by expectations that the Bank of Japan will likely step up buying if an increase in debt issuance threatens to cause a sharp fall in JGB prices and boost their yields.

Benchmark 10-year JGB futures fell 0.29 point to 152.44, with a trading volume of 9,240 lots in late afternoon trade.

The benchmark 10-year JGB yield rose 1.5 basis points to 0.015%. For the quarter, it was up 4 basis points.

The 20-year JGB yield rose 1 basis point to 0.300%. The 30-year JGB yield rose 1 basis point to 0.405%.

At the shorter end, the two-year JGB yield rose 3 basis points to minus 0.140% while the five-year yield rose 2 basis points to minus 0.105%.

The Japanese bond market as a whole is on course to post its second consecutive quarter of fall in January-March, measured by Nomura BPI, a popular benchmark.

As of Monday, the market’s total return was -0.289%.

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Business

New York order spooks Wall Street, offsets calm from policy efforts

NEW YORK (Reuters) – Wall Street retreated on Friday after New York ordered residents to stay home, rattling investors who had welcomed this week’s fiscal and monetary measures to counter the coronavirus shock and help revive the safe-haven appeal of bonds and gold.

Gold rose more than 3% at one point as it regained a bit of its flight-to-safety luster and the yield on U.S. Treasuries fell as emergency measures aimed at stabilizing financial markets briefly took hold after days of sharp volatility.

The dollar staged a furious rally this week as investors scrambled to obtain cash, rising 4.32% in the biggest weekly gain since the 2008 financial crisis. The policy efforts helped staunch the steep nosedive in global equity markets.

Stocks had gained on Thursday in less-tumultuous trade and were trading higher on Wall Street before New York Governor Andrew Cuomo said he would mandate all non-essential workers to stay home and all non-essential businesses close.

Cuomo pleaded for more medical personnel and supplies to treat coronavirus cases that could overwhelm the hospitals in New York, a state of nearly 20 million.

Cuomo’s remarks “spooked people, it spooked the market,” said Tim Ghriskey, chief investment strategist at Inverness Counsel in New York. “It’s all fear, fear of more negative headlines.”

On Wall Street, the Dow Jones Industrial Average fell 913.21 points, or 4.55%, to 19,173.98. The S&P 500 lost 104.47 points, or 4.34%, to 2,304.92 and the Nasdaq Composite dropped 271.06 points, or 3.79%, to 6,879.52.

U.S. stocks had been poised for their first two-day gain since Wall Street tumbled from all-time highs in February to their sharpest decline in three decades.

A top International Monetary Fund official said the impact of the coronavirus pandemic would be “quite severe” but the long expansionary period preceding it should help the global economy weather the shock.

The Federal Reserve rolled out more emergency support as it enhanced efforts with other major central banks to ease a global dollar-funding crunch. It also backstopped a market essential for U.S. state and local government finances and ramped up its purchases of mortgage-backed securities.

Markets have been reassured by the speedy central bank action this week but the full fiscal response from governments remains to be seen and is critical, said Kristina Hooper, chief global market strategist at Invesco in New York.

“The dash to cash we saw earlier this week has been relaxed a bit. Now Treasuries are once again perceived to be a safe-haven asset class,” Hooper said. “That’s good, as it suggests at least a dialing down of risk-off sentiment.”

Norway’s central bank became the latest to cut interest rates, while China was set to unleash trillions of yuan of fiscal stimulus to revive its economy.

The dollar eased after currencies, from the Australian dollar to the British pound, tumbled to multi-year lows earlier this week.

MSCI’s U.S.-centric gauge of stocks across the globe shed 1.84%, while emerging market stocks rose 4.58%.

U.S. gold futures settled 0.4% higher at $1,484.6 an ounce.

The dollar rose against a basket of currencies in a week when investors liquidated everything from stocks to bonds to gold and commodities to raise cash. The dollar hit a three-year peak of 102.99 in early Asian trading.

The dollar index fell 0.214%, with the euro down 0.24% to $1.0664.

The Japanese yen weakened 0.44% versus the greenback at 111.23 per dollar.

U.S. home sales surged to a 13-year high in February, but the housing market recovery is likely to be derailed by the coronavirus outbreak, which has unleashed a wave of layoffs and left the American economy headed toward recession. [L1N2BD0QT]

The global economy already is in recession as the hit to economic activity from the pandemic has become more widespread, according to economists polled by Reuters.

Oxford Economics cut its global growth forecast for 2020 to zero, making this year the second-weakest for the world economy in almost 50 years of comparable data, with only 2009, in the depths of the global financial crisis, being worse.

The broad pan-European STOXX 600 index rose 1.82%. But stocks pared some of their gains as fears over the economic shock from the coronavirus quashed initial optimism.

Britain’s FTSE rose 0.8%, Germany’s DAX gained 3.7%, and France’s CAC 40 rose 5%.

The European Central Bank’s 750 million-euro emergency bond purchase scheme, announced on Wednesday, has boosted southern European debt, alleviating some concern over how already heavily indebted states would finance the fiscal measures needed to defend against coronavirus.

Investors in Asia were happy that Wall Street had not plunged again. South Korean shares bounced 7.4%, though that still left them down more than 11% for the week.

Australia’s beleaguered market eked out a 0.70% gain, and futures for Japan’s Nikkei were trading up at 17,710, compared with the cash close of 16,552.

Oil prices fell for the fourth week in a row, with U.S. crude posting its worst week since 1991, as the coronavirus outbreak knocked the demand outlook and Moscow rejected U.S. intervention in its price war with Saudi Arabia.

West Texas Intermediate fell $2.69 to settle at $22.53 a barrel while Brent crude futures fell $1.49 to settle at $26.98 a barrel.

Euro zone bond yields tumbled as risk sentiment picked up to support Southern European bonds.

Relatively calm trading in U.S. Treasuries early in the session returned to the volatile patterns seen earlier this week after Cuomo said he would issue his executive order.

Benchmark 10-year U.S. Treasury notes fell 124 basis points to yield 0.8869%.

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World News

New York, Los Angeles shut bars, restaurants, world's central banks coordinate on coronavirus

(Reuters) – Bars, restaurants, theaters and movie houses in New York and Los Angeles were ordered to shut down and several nations in South and Central America closed their borders in the latest moves around the world to combat the spread of the coronavirus.

The U.S. Federal Reserve slashed interest rates in emergency action and other central banks took similar aggressive steps to cushion the economic impact of the disease, but Asian stock markets and the dollar continued to tumble on Monday.

European stocks were poised to open shortly lower.

At an emergency meeting, the Bank of Japan further eased monetary policy by ramping up purchases of exchange-traded funds and other risky assets. Australia’s central bank pumped extra liquidity into a strained financial system and said it would announce more policy steps on Thursday.

Leaders of the G7 countries will hold a video conference at 1400 GMT on Monday to discuss a joint response to the coronavirus outbreak, officials have said.

The coordinated policy actions were reminiscent of the sweeping steps taken just over a decade ago to fight a meltdown of the global financial system, but this time the target is an entirely unfamiliar foe – a fast-spreading health crisis with no certain end in sight that is forcing entire societies to effectively shut down.

Several countries imposed bans on mass gatherings such as sporting, cultural and religious events to combat the disease that has infected over 169,000 people globally and killed more than 6,500.

France and Spain joined Italy in imposing lockdowns on tens of millions of people while Australia ordered self-isolation of arriving foreigners.

New Zealand’s central bank slashed interest rates by 75 basis points to a record low on Monday following an emergency meeting. The Bank of Japan and four other central banks cut pricing on their swap lines to make it easier to provide dollars to their financial institutions facing stress in credit markets.

“This cannot prevent the economic fallout from social distancing,” said Ray Attrill, head of FX strategy at National Australia Bank in Sydney, referring to a method being used by many countries to try to slow the spread of the virus.

“That will require some fiscal spending and something from the government to make sure small companies are funded.”

New York Mayor Bill de Blasio said on Sunday he was ordering restaurants, bars and cafes to only sell food on a take-out or delivery basis. He also said he would order nightclubs, movie theaters, small theater houses and concert venues to close.

“These places are part of the heart and soul of our city,” he said. “But our city is facing an unprecedented threat, and we must respond with a wartime mentality.”

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BORDER CLOSURES

New York also joined the nation’s other major public school systems in calling off classes starting this week.

Los Angeles Mayor Eric Garcetti issued similar orders later on Sunday. Any restaurant, bar or cafe selling food will only be able to do so via delivery or take-out, officials said.

China, were the virus surfaced late last year, said industrial output contracted at the sharpest pace in 30 years in the first two months of the year as the disease disrupted the world’s second-largest economy.

The International Olympic Committee will hold talks with heads of international sports organizations on Tuesday in response to the pandemic, a source close to an international federation briefed on the issue said, amid growing doubts that the Tokyo 2020 Olympics starting July 24 can proceed.

Nations in South and Central America ramped up measures to contain the infection, with Panama banning entry of non-resident foreigners and Honduras closing its borders to passenger traffic for a week.

The leaders of Argentina and Peru also announced border closures on Sunday to curb coronavirus. Argentina will close its borders for 15 days to non-residents, President Alberto Fernandez said in a televised press conference.

Public and private school classes would also be suspended until March 31, Fernandez said. National parks would be closed.

Peruvian President Martin Vizcarra said later on Sunday that Peru would also close its borders, suspending air and sea transport. He called on citizens to self-quarantine for 15 days to help slow the infection.

“The worst is yet ahead for us,” said Dr. Anthony Fauci, the top infectious diseases expert in the United States. “It is how we respond to that challenge that is going to determine what the ultimate end point is going to be.”

The policy actions were not enough to calm skittish investors. On Monday, E-mini futures for the S&P 500 index fell 4.77% to their daily trading limit outside the United States.

EUROSTOXXX 50 futures fell 3.4% and FTSE futures 2.7%.

MSCI’s index of Asia-Pacific shares outside Japan slid 3.1% to lows not seen since early 2017 while Tokyo stocks were over 2% lower.

The dollar was last down 0.5% on the Japanese yen at 107.36, having fallen 1.7% earlier in the day.

“It may be a shot in the arm for risk assets and help to address liquidity concerns … however, it also raises the question of whether the Fed has anything left in the tank should the spread of the virus not be contained,” said Kerry Craig, global market Strategist at J.P. Morgan Asset Management.

“We really need to see the fiscal side … to prevent a longer than needed economic slowdown.”

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