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Economy

GLOBAL MARKETS-Asian stocks slip as Trump warns of horrors to come

* Trump warns of ‘horrific’ days ahead

* Asian stocks slip, bonds rally, dollar firms

* U.S. jobless claims due at 1230 GMT, seen hitting fresh record

* Asian stock markets: tmsnrt.rs/2zpUAr4

By Tom Westbrook and Herbert Lash

SINGAPORE/NEW YORK, April 2 (Reuters) – Asian equities fell for a second session on Thursday, after a dire warning about the U.S. coronavirus death toll had investors looking to the safety of dollars and bonds and bracing for more bad news from U.S. jobless figures.

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 1.2%. Japan’s Nikkei extended Wednesday’s heavy drop with a 1.5% fall, and investors are beginning to worry that equities may re-test last month’s lows.

Markets in Hong Kong, Sydney, Shanghai and Seoul fell, though futures for the S&P 500 bounced following Wall Street’s 4% plunge overnight.

“Difficult days are ahead for our nation,” U.S. President Donald Trump told reporters at the White House on Wednesday.

“We’re going to have a couple of weeks, starting pretty much now, but especially a few days from now, that are going to be horrific.”

Trump had initially played down the virus’ severity, but White House medical experts now forecast that even if Americans follow unprecedented stay-at-home orders, some 100,000 to 240,000 people could die from the respiratory disease.

The World Health Organization said the global case count will reach 1 million and the death toll 50,000 in the next few days. It currently stands at 43,412.

Markets are also steeled for bad news on the economic front when weekly U.S. jobless claims data is released at 1230 GMT.

“The shift in rhetoric from the White House has hurt some of the more bullish traders,” said Michael McCarthy, chief strategist at brokerage CMC Markets in Sydney, while optimism about local stimulus was waning quickly.

Australia’s benchmark ASX 200 index fell 2.6%, led by falls in bank stocks after New Zealand’s central bank ordered a suspension of bank dividends – hitting Australia’s banks, which own most of New Zealand’s big lenders.

Shelter was sought in the bond market, with the yield on benchmark 10-year U.S. Treasuries – which falls when prices rise – dropping to 0.5680%, its lowest since March 10.

The dollar held its overnight gains.

U.S. JOBLESS SEEN SWELLING

Trump also said overnight that he is considering a plan to halt flights to coronavirus hot zones in the United States, which would hammer an already reeling airline industry and add to an overall slowdown that will curb corporate earnings.

Wall Street’s three major indexes fell more than 4% overnight.

“The question of whether the U.S. index goes to test the March lows will be all the talk today,” Chris Weston, head of research at Melbourne brokerage Pepperstone, said in a note.

“Earnings estimates are too high,” he said. “And when we’re hearing of companies curbing buybacks, and shelving dividend plans, then we should expect this to resonate through earnings downgrades too.”

U.S. labour market data will likely provide the next test. According to a Reuters survey of economists, initial claims for jobless benefits last week probably surpassed the week-ago record of 3.3 million, with 3.5 million expected.

In currency markets, safety and liquidity remained in hot demand, with the dollar standing at $1.0950 per euro and 107. 31 Japanese yen.

It also mostly held gains against the Australian and New Zealand dollars and rose against emerging market currencies.

Spot gold fell 0.5% to $1,584.33 an ounce.

Oil futures bounced after overnight drops, before paring gains since the demand outlook remains weak and storage tanks are quickly filling with an oversupply of crude.

Brent futures last traded $1 firmer at $25.78 per barrel and U.S. crude was 3% higher at $20.96 a barrel.

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Business

Equities drop as evidence mounts of deep global recession

NEW YORK (Reuters) – World equity markets began the new quarter with steep losses on Wednesday as evidence mounted that the coronavirus pandemic was sending the global economy into a deep recession.

Traders headed for the safety of government bonds, the dollar [USD/] and gold [GOL/] following sharp slowdowns in manufacturing activity in Japan and Germany, one day after data showed U.S. consumer confidence fell to 3-year lows.

The pan-European STOXX 600 sank 2.7% [.EU], while MSCI’s gauge of stocks across the globe shed 1.11%. Tokyo’s Nikkei slumped 4.5% after the worst plunge in factory activity in almost a decade.

On Wall Street, major benchmarks opened sharply lower after President Donald Trump warned late Tuesday that maintaining social distancing guidelines for the next 30 days would be a “matter of life and death.”

The Dow Jones Industrial Average slumped 755.87 points, or 3.45%, to 21,161.29, the S&P 500 lost 89.48 points, or 3.46%, to 2,495.11 and the Nasdaq Composite dropped 209.88 points, or 2.73%, to 7,490.22.

“President Trump’s warning about two dreadful weeks ahead and 100,000 – 240,000 deaths in the coming months is definitely putting a negative tone on the market,” said Societe Generale strategist Kit Juckes. “It is pretty risk-off out there. It is definitely a day of lower bonds yields, falling equity indexes and tin hats.”

U.S. markets ended the first quarter on Tuesday, marked by the largest quarterly fall since 1987 for the Dow Jones and the steepest for the benchmark S&P 500 since the financial crisis. The fact it all happened in a month and from record highs made it feel all the more brutal.

U.S. economic activity is likely to be “very bad” and the unemployment rate could rise above 10% because of efforts to slow the spread of the coronavirus, Cleveland Federal Reserve Bank President Loretta Mester told CNBC. [L1N2BO2UT]

In currency markets, the dollar’s safe-haven appeal saw it continue to rise.

“In my view, markets have still not fully priced in the damage from the coronavirus, with some people still talking about V-shaped recovery,” said Masahiko Loo, portfolio manager at Alliance Bernstein in Tokyo.

“The U.S. and Europe are hit by the first wave now, but as you can see in Asia, there could be more waves from re-imported cases. Human psychology also does not quickly recover either after an experience like this.”

Traders jumped toward the perceived safety of government bonds, pushing the yield on the benchmark 10-year U.S. Treasury note to 0.5957% from 0.699% late on Tuesday.

Commodity markets were much rougher. Brent crude fell nearly 6% at one point to as low as $24.80 per barrel as the United States, Russia, and Saudi Arabia jostled over a massive oversupply of oil. [O/R]

Crude oil benchmarks ended the first quarter with their biggest losses in history. Both U.S. and Brent futures got hammered throughout March by the pandemic and a Saudi-Russia price war.

Global demand has been cut sharply by travel restrictions. Forecasters at major merchants and banks see demand slumping by 20% to 30% in April, and for weak consumption to linger for months.

Graphic: Global assets in 2019, tmsnrt.rs/2jvdmXl

Graphic: Global currencies vs. dollar, tmsnrt.rs/2egbfVh

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Categories
World News

World Markets LIVE: FTSE plummets 6%, Dow rallies – experts warn ‘not out of woods yet’

The UK-based FTSE 100, the share index of the 100 companies listed on the London Stock Exchange with the highest market capitalisation, has today sunk 5.4 percent by 313.31 points to 5,502.42. The stock market has rallied this week after experiencing sharp falls over recent weeks, before dropping again since opening this morning, but still set to end the week 300 points up. Fiona Cincotta, an analyst at City Index, said: “The FTSE has opened on the back foot, snapping three straight sessions of gains.”

But she said it still leaves the index on course for a gain of around 10 percent since last Friday – its first week in the green since early February.

She added: “The big question is whether this is a false floor or whether it is the start of a more meaningful advance.

“The awful data is only just starting to show through. Chinese industrial profits slumped by the most on record. Italian and French consumer confidence is expected to plunge.”

The Dow Jones Industrial Average, which measures the stock performance of 30 large companies listed on stock exchanges in the United States, has surged more than 20 percent this week.

It plummeted more than 300 points during early morning trading but has bounced back to 21,670.14, and is on course for its biggest weekly gain since 1938.

But Ryan Detrick, senior market strategist at LPL Financial, tweeted: “We aren’t out of the woods quite yet.”

He warned the bear market in 2008 and 2009 saw a 27 percent rally before plummeting massively by 56 percent.

FOLLOW BELOW FOR LIVE UPDATES:

4.34pm update: EU leaders’ talks on coronavirus stimulus package collapse

The bloc’s leaders have failed to agree on a joint strategy for a stimulus package as the coronavirus outbreak blows huge holes in leading economies.

Germany and the Netherlands blocked a call from France, Italy and Spain to issue joinjt bonds to help finance a recovery.

The EU27 are also at odds over setting up a credit line worth two percent of their economic output from the European Stability Mechanism bailout fund of the 19-member single-currency zone.

They have now told their finance ministers to finalise the details within the next two weeks.

4.23pm update: Traders fear more huge fluctuations in global markets

The accelerating coronavirus outbreak is sparking fears of a deep global recession.

This has seen traders to warn of more wild swings in financial markets until there are signs of new cases peaking, and sweeping restrictions placed on entire countries being lifted.

Neil Wilson, chief market analyst at Markets.com in London, said: “Big questions are starting to be answered, like how bad is the spread of infections (and) how bad is the economic damage.

“That is a recovery narrative, not panic, but if a recovery is not as swift as hoped, equity markets will suffer another hit.”

4.13pm update: US Stock market warning over opening of economy

Nick Raich, CEO of The Earnings Scout, told clients Thursday: “If you believe the economy will be (opening) back up soon, buy stocks now.

“However, if shutdowns persist into May and June, stock prices will need to reset even lower to reflect even more lost growth.”

4.10pm update: Analyst unsure which way FTSE is heading 

Fiona Cincotta, an analyst at City Index, said: “The big question is whether this is a false floor or whether it is the start of a more meaningful advance.

“The awful data is only just starting to show through. Chinese industrial profits slumped by the most on record. Italian and French consumer confidence is expected to plunge.”

4pm update: Market strategist urges caution over Dow Jones rally

The Dow Jones has surged more than 20 percent this week. 

The US stock market is on course for its biggest weekly gain since 1938. 

But Ryan Detrick, senior market strategist at LPL Financial, warned: “We aren’t out of the woods quite yet.”

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Categories
Business

Asia stocks rebound, Fed pits endless QE against economic reality

SYDNEY (Reuters) – Asian stocks rebounded sharply on Tuesday as the U.S. Federal Reserve’s promise of bottomless dollar funding eased painful strains in financial markets, even if it could not soften the immediate economic hit of the coronavirus.

While Wall Street seemed unimpressed, investors in Asia were encouraged enough to lift E-Mini futures for the S&P 500 by 3% and Japan’s Nikkei 6.2%. If sustained it would be the biggest daily rise for the Nikkei since late 2016. [.T]

MSCI’s broadest index of Asia-Pacific shares outside Japan jumped 4.2%, to more than halve Monday’s drop. Shanghai blue chips gained 2.7%.

Europe also looked a shade brighter as EUROSTOXXX 50 futures climbed 3.3% and FTSE futures 3.1%.

In its latest drastic step, the Fed offered to buy unlimited amounts of assets to steady markets and expanded its mandate to corporate and muni bonds.

The numbers were certainly large, with analysts estimating the package could make $4 trillion or more in loans to non-financial firms.

“This open-ended and massively stepped-up program of QE is a very clear signal that the Fed will do all that is needed to maintain the integrity and liquidity of the Treasury market, key asset-backed markets and other core markets,” said David de Garis, a director of economics at NAB.

The Fed’s package helped calm nerves in bond markets where yields on two-year Treasuries hit their lowest since 2013, while 10-year yields dropped back to 0.79%.

Analysts cautioned it would do little to offset the near-term economic damage done by mass lockdowns and layoffs.

Speculation is mounting data due on Thursday will show U.S. jobless claims rose an eye-watering 1 million last week, with forecasts ranging as high as 4 million.

Goldman Sachs warned the U.S. economy growth could contract by 24% in the second quarter, two-and-a-half times the pace of the previous postwar record.

A range of flash surveys on European and U.S. manufacturing for March are due later on Tuesday and are expected to show deep declines into recessionary territory.

Surveys from Japan showed its services sector shrank at the fastest pace on record in March and factory activity at the quickest in about a decade.

DOLLAR OFF HIGHS

While governments around the globe are launching ever-larger fiscal stimulus packages, the latest U.S. effort remains stalled in the Senate as Democrats said it contained too little money for hospitals and not enough limits on funds for big business.

The logjam combined with the stimulus splash from the Fed to take a little of the shine off the U.S. dollar, though it remains in demand as a global store of liquidity.

“The special role of the USD in the world’s financial system – it is used globally in a range of transactions such as commodity pricing, bond issuance and international bank lending – means USD liquidity is at a premium,” said CBA economist Joseph Capurso.

“While liquidity is an issue, the USD will remain strong.”

For now, the prospect of massive U.S. dollar funding from the Fed saw the currency ease back to 110.38 yen from Monday’s one-month top of 111.56.

The euro bounced 0.8% to $1.0805, up from a three-year trough of $1.0635. The dollar index slipped 0.4% to 101.720 and off a three-year peak of 102.99.

Commodity and emerging market currencies that suffered most during the recent asset rout, also benefited from the Fed’s steadying hand. The Australian dollar climbed 1.5% to $0.5915 and away from a 17=year low of $0.5510.

Gold surged in the wake of the Fed’s promise of yet more cheap money, and was last up 1.7% at $1,578.45 per ounce having rallied from a low of $1,484.65 on Monday.

Oil prices also bounced after recent savage losses, with U.S. crude up $1.09 at $24.45 barrel. Brent crude firmed 97 cents to $28.00.

(This story has been refiled to clarify Goldman Sachs forecast refers to output in paragraph 11)

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Categories
Economy

GLOBAL MARKETS-Asia stocks set to rally as Fed goes limitless

* Asian stock markets : tmsnrt.rs/2zpUAr4

* S&P 500 futures bounce in Asia, Nikkei futures jump

* Investors relieved as Fed pledge eases bond market stress

* Treasury yields fall, drag down yields globally

* Dollar off its peaks, supported by liquidity flows

By Wayne Cole

SYDNEY, March 24 (Reuters) – Asian stocks were set to rally on Tuesday as the U.S. Federal Reserve’s sweeping pledge to spend whatever it took to stabilise the financial system eased debt market pressures, even if it could not offset the immediate economic hit of the coronavirus.

While Wall Street still finished lower, investors in Asia were encouraged enough to lift E-Mini futures for the S&P 500 by 2%.

MSCI’s broadest index of Asia-Pacific shares outside Japan added 0.5% in early trade, while Nikkei futures traded at 18,115 compared to a cash close of 16,887.

In its latest drastic step, the Fed offered to buy unlimited amounts of assets to steady markets and expanded its mandate to corporate and muni bonds.

The numbers were certainly large, with analysts estimating the package could make $4 trillion or more in loans to non-financial firms.

“This open-ended and massively stepped-up programme of QE is a very clear signal that the Fed will do all that is needed to maintain the integrity and liquidity of the Treasury market, key asset-backed markets and other core markets,” said David de Garis, a director of economics at NAB.

“COVID-19 developments remain the wild card, as is the development of government policies to support cash flow and the economy.”

The Fed’s package helped calm nerves in bond markets where yields on two-year Treasuries hit their lowest sine 2013, while 10-year yields dropped back sharply to 0.77%.

Yet analysts fear it will do little to offset the near-term economic damage done by mass lockdowns and layoffs.

Speculation is mounting data due on Thursday will show U.S. jobless claims rose an eye-watering 1 million last week, with forecasts ranging as high as 4 million.

Goldman Sachs warned the U.S. economic growth could contract by 24% in the second quarter, two-and-a-half times as large as the previous postwar record.

A range of flash surveys on European and U.S. manufacturing for March are due later on Tuesday and are expected to show deep declines into recessionary territory.

While governments around the globe are launching ever-larger fiscal stimulus packages, the latest U.S. effort remains stalled in the Senate as Democrats said it contained too little money for hospitals and not enough limits on funds for big business.

The logjam combined with the stimulus splash from the Fed to take a little of the shine off the U.S. dollar, though it remains in demand as a global store of liquidity.

“The special role of the USD in the world’s financial system – it is used globally in a range of transactions such as commodity pricing, bond issuance and international bank lending – means USD liquidity is at a premium,” said CBA economist Joseph Capurso.

“While liquidity is an issue, the USD will remain strong.”

The dollar eased just a touch on the yen to 110.90 after hitting a one-month top at 111.59 on Monday, while the euro inched up to $1.0756 from a three-year trough of $1.0635.

The dollar index dipped 0.3% to 102.140.

Gold surged in the wake of the Fed’s promise of yet more cheap money, and was last at $1,564.51 per ounce having rallied from a low of $1,484.65 on Monday.

Oil prices also bounced a little after recent savage losses, with U.S. crude up $1.16 at $24.52 barrel.

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Categories
Business

Rout resumes as more nations self-isolate against virus

LONDON/SYDNEY/HONG KONG (Reuters) – Financial markets around the world took another hammering on Monday as a rising tide of national coronavirus lockdowns threatened to overwhelm policymakers’ frantic efforts to cushion what is likely to be a deep global recession.

European stocks dived 4.5% as they reopened and commodity markets also saw more heavy selling as the global death toll from the virus passed 14,000.

Investors tried to take cover in ultra-safe government bonds and in the Japanese yen in currency markets but with so much uncertainty about when any semblance of normality might return there were few places to really hide.

“Further deterioration in the COVID-19 outbreak is severely damaging the global economy,” Morgan Stanley analysts warned on Monday. “We expect global growth to dip close to GFC (global financial crisis) lows, and U.S. growth to a 74-year low in 2020.”

Goldman Sachs sent a similar warning and in a taste of the pain to come, E-Mini futures for the S&P 500 dived 3.5% [.N] and MSCI’s main world stocks index was down 1.6% and almost at 4-year lows.

UBS Australian head of equities distribution George Kanaan said global financial markets were gripped by fear, which seemed unlikely to ease any time soon, despite the co-ordinated efforts of governments and central banks around the world.

“I have been in the financial markets for 27 years and I have never seen anything like this,” he told Reuters by telephone from Sydney.

“This is unprecedented in terms of fears and there are two elements driving that.

“First is that this involves masses of people. In the GFC, that was an event that occurred in the investment banks around the world, it didn’t involve people on the street. The second is that social media is helping to drive this fear and panic.”

In Asian trade, MSCI’s broadest index of Asia-Pacific shares outside Japan lost 5.4%, with New Zealand’s market shedding a record 10% at one point as the government closed all non-essential businesses.

Shanghai blue chips dropped 3.3%, though Japan’s Nikkei rose 2.0% aided by expectations of more aggressive asset buying by the Bank of Japan. In Australia, the S&P/ASX200 dropped 5.62% to take the index to a seven-year low.

Globally, analysts are dreading data on weekly U.S. jobless claims due on Thursday amid forecasts they could balloon by 750,000, and possibly by more than a million.

U.S. stocks have fallen more than 30% from their mid-February peak and even the safest areas of the bond market are experiencing liquidity stress as distressed funds are forced to sell good assets to cover positions gone bad.

In contrast to the response by authorities to the global health crisis, however, are calls from some on Wall Street to ease restrictions as soon as possible to give the economy room to recover.

“Extreme measures to flatten the virus ‘curve’ is sensible-for a time-to stretch out the strain on health infrastructure,” former Goldman Sachs Chief Executive Lloyd Blankfein tweeted.

“But crushing the economy, jobs and morale is also a health issue-and beyond. Within a very few weeks let those with a lower risk to the disease return to work.”

MOUNTING ECONOMIC TOLL

The mounting economic toll led to a major rally in sovereign bonds late last week, with efforts by central banks to restore liquidity in the market allowing for more two-way trade.

Yields on the benchmark U.S. 10-year note were down at 0.80%, having dived all the way to 0.84% on Friday from a top of 1.28%. European benchmarks like German Bunds were at around -0.36% down more than 20 bps from last week’s 10-month highs.

Calls were continuing for the euro zone’s 19 governments to issue the bloc’s first joint bonds to try to get the region through the economic crush of the virus lockdowns.

In New Zealand, the central bank announced its first outright purchase of government paper aiming to inject much-needed liquidity into the local market.

In currency markets, the first instinct on Monday was to dump those leveraged to global growth and commodity prices, sending the Australian dollar down 0.8% to $0.5749.

The U.S. dollar started firm but took a step back after partisan battles in the U.S. Senate stopped a coronavirus response bill from advancing.

The dollar eased 0.5% to 110.31 yen while the euro recouped losses to be up 0.1% at $1.0705.

The dollar had been a major gainer last week as investors fled to the liquidity of the world’s reserve currency, while some funds, companies and countries desperately sought more cash to cover their dollar borrowings.

The steady rise in the dollar undermined gold, which slipped 0.3% to $1,493.83 per ounce.

Oil prices were sharply lower. Brent crude futures dropped $1.30, or 4.9%, to $25.66 a barrel, while U.S. crude was down 29 cent to $22.34.

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Economy

GLOBAL MARKETS-Asia shares dive with S&P 500, bond yields fall anew

* Asian stock markets : tmsnrt.rs/2zpUAr4

* S&P 500 futures off 5%, hit limit down

* Asian shares under water, oil falls again

* US 10-year bond yield drops to 0.80%

* More countries shut businesses, tell people to stay home

By Wayne Cole

SYDNEY, March 23 (Reuters) – Asian shares slid on Monday as more countries all but shut down in the fight against the coronavirus, threatening to overwhelm policymakers’ frantic efforts to cushion what is clear to be a deep global recession.

In a taste of the pain to come, E-Mini futures for the S&P 500 dived 5% at the open to be limit down.

MSCI’s broadest index of Asia-Pacific shares outside Japan lost 2%, with South Korea badly hit.

Japan’s Nikkei added 0.8%, perhaps aided by expectations of more asset buying by the Bank of Japan, but the commodity-heavy Australian market shed 5%.

Oil was not far behind as mass bans on travel worldwide crushed demand for fuel.

Airlines cancelled more flights as Australia and New Zealand advised against non-essential domestic travel, the United Arab Emirates (UAE) halted flights for two weeks and Singapore and Taiwan banned foreign transit passengers.

Brent crude futures slid $1.68 to $25.30 a barrel, while U.S. crude shed $1.01 to $21.62.

Analysts fear the collapse in oil and other commodity prices will set off a deflationary wave making it harder for monetary policy easing to gain traction as economies shut down.

Nearly one in three Americans were ordered to stay home on Sunday to slow the spread of the disease, while Italy banned internal travel as deaths there reached 5,476.

U.S. President Donald Trump went on TV to approve disaster deceleration requests from New York and Washington, while St. Louis Federal Reserve President James Bullard warned unemployment could reach 30% unless more was done fiscally.

U.S. stocks have already fallen more than 30% from their mid-February and even the safest areas of the bond market experiencing liquidity stress as distressed funds are forced to sell good assets to cover positions gone bad.

WAITING ON THE DISEASE

“It would be a brave, or foolish, man to call the bottom in equities without a dramatic medical breakthrough,” said Alan Ruskin, head of G10 FX strategy at Deutsche Bank.

Also needed would be evidence that China could re-emerge from the virus without reigniting infections, and that other major economies had hit inflection points for infection rates, he added.

“Even were social distancing to subside at the earliest plausible dates in Europe and the U.S., it will have done extraordinary damage to confidence in a host of key sectors,” Ruskin said.

The mounting economic toll led to a major rally in sovereign bonds late last week, with efforts by central banks to restore liquidity in the market allowing for more two-way trade.

Yields on the benchmark U.S. 10-year note were down at 0.80%, having dived all the way to 0.84% on Friday from a top of 1.28%.

In New Zealand, the central bank announced its first outright purchase of government paper aiming to inject much-needed liquidity into the local market.

In currency markets, the first instinct on Monday was to dump those leveraged to global growth and commodity prices, sending the Australian dollar down 0.8% to $0.5749.

The U.S. dollar started firm but took a step back after partisan battles in the U.S. Senate stopped a coronavirus response bill from advancing.

The dollar eased 0.4% to 110.43 yen, while the euro recouped losses to be flat at $1.0692.

Against a basket of currencies the dollar was still a fraction firmer at 102.510.

The dollar was a major gainer last week as investors fled to the liquidity of the world’s reserve currency, while some funds, companies and countries sought more cash to cover their dollar borrowings.

“The ‘dash for cash’ will remain a key driver of currency markets this week,” said Kim Mundy, a currency strategist at CBA.

“We expect strong USD demand to continue to cause liquidity problems and keep volatility elevated. Direct intervention by central banks in currency markets to reduce market dysfunction is possible.”

The steady rise in the dollar undermined gold, which slipped 0.3% to $1,493.83 per ounce.

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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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Categories
Economy

CEE MARKETS-Stocks, currencies jump on stimulus hopes; MOL surges 15%

    By Anita Komuves
    BUDAPEST, March 20 (Reuters) - Central European stock
indexes rebounded and currencies firmed on Friday as regional
governments and central banks announced measures to keep
economies afloat during border closures and major disruptions in
business activity.
    "Despite negative signals from Italy, where the number of
deaths due to the coronavirus pandemic exceeded the number of
deaths in China, Friday brings stabilization of sentiment in the
financial markets," Bank Millenium said in a note.
    Regional currencies jumped on Friday after most of them
plunged and some hit fresh record lows the day before. The
Hungarian forint, the Czech crown and the Polish zloty are all
down around 6% this year.      
    The Czech crown led gains in the region, it was up
2.67% on the day and was trading at 26.950 to the euro, as of
0958 GMT. The crown is still at five-year lows, at a level where
the currency traded between 2013 and 2017, when the Czech
central bank was pursuing a policy of intervention to keep it
weak. 
    "After correction on EURCZK, there is no interest to trade
now," a Prague-based dealer said. 
    Activity is still low, which exaggerates moves and the
market is "tired," he added. 
    The forint was up 2.22% on the day and traded at
350.20 to the euro. The currency hit a new record low of 359.50
to the euro on Thursday. 
    The Romanian leu was up 0.11% and was trading at
4.845 to the euro. The leu also fell to new lows on Thursday,
and leading the central bank to step into the foreign exchange
market on Thursday, according to dealers.
    Regional stock indexes surged on Friday after steep losses
at the beginning of the week. Budapest's equities led the
gains with 5.54%, with oil and gas group MOL shares
soaring almost 15% on a rise in oil prices and investor hopes
for stimulus measures worldwide.  
    Oil prices rose on Friday as the world's richest nations
poured unprecedented aid into the global economy to stop a
coronavirus-driven recession and U.S. President Donald Trump
hinted he may intervene in the price war between Saudi Arabia
and Russia.
    Prague and Warsaw also strengthened by about
5%. Bucharest's stocks gained 2.54%.
    Governments and central banks across the region took turns
announcing emergency steps to help their economies that are set
to be hit by the disruptions to business and daily life being
felt around the world as governments seek to contain the spread
of the new coronavirus that has infected more than 200,000
worldwide.
    Hungary's finance minister said on Thursday that the economy
will recover from the blow it suffered from the coronavirus
pandemic only very slowly and the ship has sailed for the
economy this year.
    The Czech and Polish central banks have delivered rate cuts
and Hungary's central bank on Thursday detailed more help to
banks, after a blanket moratorium on all household and business
loans imposed by the government until the end of this year.
    On bond markets, Poland's central bank bought back bonds
worth 2.66 billion zloty ($630.35 million) as part of a new
program. 
    Polish rate-setters sent mixed messages on Friday about the
possibility of new rate cuts: Lukasz Hardt was quoted saying
that there is no need to cut interest rates further, while
Grazyna Ancyparowicz sees a possibility of another interest rate
cut.  
    The Polish Finance Ministry on Thursday decided to lift the
systemic buffer for banks, in a move that will free up 30
billion zloty of fresh capital that may be spent on financing
businesses at the time of coronavirus epidemic.

    
            CEE        SNAPSHOT    AT                         
            MARKETS               1058 CET            
                       CURRENCIE                              
                       S                              
                       Latest     Previous  Daily     Change
                       bid        close     change    in 2020
 Czech                   26.9500   27.6690    +2.67%    -5.63%
 crown                                                
 Hungary                350.2000  357.9700    +2.22%    -5.44%
 forint                                               
 Polish                   4.5436    4.5633    +0.43%    -6.32%
 zloty                                                
 Romanian                 4.8455    4.8510    +0.11%    -1.18%
 leu                                                  
 Croatian                 7.6080    7.6145    +0.09%    -2.14%
 kuna                                                 
 Serbian                117.4600  117.5400    +0.07%    +0.09%
 dinar                                                
 Note:      calculated from                 1800 CET          
 daily                                                
 change                                               
                                                              
                       Latest     Previous  Daily     Change
                                  close     change    in 2020
 Prague                   746.31  709.1500    +5.24%   -33.10%
 Budapest               31128.34  29494.19    +5.54%   -32.45%
 Warsaw                  1541.37   1469.43    +4.90%   -28.31%
 Bucharest               7572.35   7384.75    +2.54%   -24.10%
 Ljubljana                716.96    702.12    +2.11%   -22.56%
 Zagreb                  1416.88   1373.50    +3.16%   -29.77%
 Belgrade   <.BELEX15     612.91    620.73    -1.26%   -23.55%
            >                                         
 Sofia                    414.85    405.80    +2.23%   -26.98%
                                                              
                       Yield      Yield     Spread    Daily
                       (bid)      change    vs Bund   change
                                                      in
 Czech                                                spread
 Republic                                             
   2-year   <CZ2YT=RR     1.4180    0.0350   +206bps     +2bps
            >                                         
   5-year   <CZ5YT=RR     1.5400    0.0510   +197bps     +9bps
            >                                         
   10-year  <CZ10YT=R     1.7350    0.0000   +199bps     +9bps
            R>                                        
 Poland                                                       
   2-year   <PL2YT=RR     1.2720    0.0470   +191bps     +3bps
            >                                         
   5-year   <PL5YT=RR     1.7090   -0.0490   +214bps     -2bps
            >                                         
   10-year  <PL10YT=R     2.1290   -0.0570   +239bps     +3bps
            R>                                        
            FORWARD                                           
                       3x6        6x9       9x12      3M
                                                      interban
                                                      k
 Czech Rep          <       0.78      0.42      0.36      1.80
            PRIBOR=>                                  
 Hungary            <       0.53      0.52      0.52      0.61
            BUBOR=>                                   
 Poland             <       0.72      0.67      0.65      1.19
            WIBOR=>                                   
 Note: FRA  are for ask prices                                
 quotes                                               
 ***************************************************          
 ***********                                          
    

 (Additional reporting by Jason Hovet in Prague and Alan
Charlish in Warsaw, Editing by Sherry Jacob-Phillips)
  
 
 

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Categories
Business

Asian stocks fight for a toehold as ECB stimulus slows panic

SINGAPORE (Reuters) – Asian stocks struggled to find their footing in volatile trade on Thursday, as the latest promise of stimulus from the European Central Bank propped up sentiment while the world struggles to contain the coronavirus pandemic.

U.S. stock futures EScv1 turned positive and rose nearly 2% after the ECB announced a bond-buying program. Japan’s Nikkei .N225 opened 1.4% higher.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS dipped 0.25% amid choppy trade throughout the region, with Australia’s benchmark running as much as 3% higher before returning to flat and Korea’s Kospi .KS11 gyrating.

The ECB will buy 750 billion euro ($820 billion) in bonds through 2020, with Greek debt and non-financial commercial paper eligible under the program for the first time.

“It’s given us a shot in the arm,” said Michael McCarthy, chief market strategist at brokerage CMC Markets in Sydney, but he added he expects it to be short-lived.

“This is about the impact on demand and the disruption of global supply chain…(bond buying) is not speaking directly to the key problem for markets. I doubt very much this is a turning point,” he said.

Underlining the fragility of sentiment

Overnight on Wall Street, the S&P 500 .SPX fell 5% and is down nearly 30% over a month. Household-name blue chips plunged, with General Motors (GM.N) and Boeing (BA.N), each symbols of U.S. industrial might, losing more than 17% in a single day.

Selling extended across almost all asset classes as investors liquidated portfolios.

Benchmark U.S. 10-year Treasuries US10YT=RR, usually a haven in times of turmoil, suffered their sharpest two-day selloff in nearly 20 years. Gold XAU= is down 3% for the week and oil fell to an 18-year low as quarantine lockdowns spread across the globe.

In currency markets, the dollar is king and jumped to a three-year high overnight amid a rush for the world’s reserve currency in times of crisis.

On Wednesday, the virus outbreak worsened. Italy reported the largest single-day death toll from coronavirus since the outbreak began in China in late 2019.

It has killed more than 8,700 people globally, infected more than 212,000 and prompted emergency lockdowns on a scale not seen in living memory.

“It is serious. Take it seriously,” German Chancellor Angela Merkel told her nation in a televised speech amid the shutdown of almost everything except bakeries, banks, pharmacies and grocers.

The ECB’s move follows emergency interest rate cuts around the globe, enormous fiscal support packages and six central banks promising discount dollars to banks to alleviate a squeeze in greenback funding.

But so far none of it has been able to put a floor under dire sentiment, and some $15 trillion in shareholder value has been wiped out in little more than a month of heavy selling.

The U.S. economy could shrink 14% next quarter, a JP Morgan economist said on Wednesday, one of the most dire calls yet on the potential hit to the United States.

“I’d say the market is uninvestable at this point,” said Daniel Cuthbertson, managing director at Value Point Asset Management in Sydney. “Until we get a containment of global contractions, the market is just going to be directionless.”

On Thursday, the Reserve Bank of Australia pumped a record $7.4 billion into the banking system and is due to make an out-of-cycle policy announcement at 0330 GMT.

Investors are also looking to a March German sentiment survey due at 0900 GMT and U.S. jobless figures due at 1230 GMT for early signals on how the virus is hitting two of the world’s economic powerhouses.

Oil bounced back in Asian trade, with U.S. crude CLc1 last up 17% to $23.84 and Brent LCOc1 up $2 to $27.06.

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