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Economy

GLOBAL MARKETS-Stocks fall as virus uncertainty lingers; dollar set for weekly loss

* Graphic: World FX rates in 2020 tmsnrt.rs/2egbfVh (Updates prices, changes comment, byline, dateline; previous LONDON)

By Rodrigo Campos

NEW YORK, March 27 (Reuters) – Stocks across the globe fell on Friday after a historic three-day run-up, with indexes poised to close the month and quarter with starkly negative performances.

The volatility of the erratic markets is expected to continue as the coronavirus pandemic that triggered closures in economies worldwide remains very much a threat.

The United States surpassed two grim milestones on Thursday as virus-related deaths soared past 1,000 and it become the world leader in confirmed cases.

The uncertainty over the overall human and economic toll was reflected in financial markets, with MSCI’s gauge of global stocks on track to post both its largest weekly percentage gain since 2008 and its largest monthly and quarterly drops since 2008.

The infection rate for the coronavirus is driving much of the market at a time of great uncertainty, said Yousef Abbasi, global market strategist at INTL FCStone Financial Inc in New York.

“My big hang-up here is when the curve does start to flatten, that doesn’t mean we can return to normal human and economic behavior. If we do return to normal human and economic behavior, we risk the chance the curve goes parabolic again. Just from the perspective of how long this potentially can last, there’s still a great deal of uncertainty,” he said.

The Dow Jones Industrial Average fell 827.25 points, or 3.67%, to 21,724.92, the S&P 500 lost 87.31 points, or 3.32%, to 2,542.76 and the Nasdaq Composite dropped 255.69 points, or 3.28%, to 7,541.85.

The pan-European STOXX 600 index lost 3.22% and MSCI’s gauge of stocks across the globe shed 2.41%.

Emerging market stocks lost 1.07%.

Stock markets have rallied over the past week on trillions of dollars of enacted and pledged economic stimulus by policymakers worldwide, from central banks to governments.

Policymakers may need to offer more stimulus as the virus slams the brakes on economic activity and increases healthcare spending.

“Next week, markets will likely continue to focus on the spread of COVID-19 – whether European cases are reaching a peak, how much of the U.S. will be put in lockdown, and whether China can avoid a second wave,” said Gaétan Peroux, strategist at UBS Global Wealth Management.

The U.S. House of Representatives is expected to pass a $2.2 trillion stimulus package that will flood the world’s largest economy with money to stem the economic damage caused by the pandemic.

Amid the avalanche of stimulus, the U.S. dollar was little changed for the day and remained on track for its biggest weekly decline since May 2009.

The dollar index fell 0.393% on Friday.

The euro was up 0.24% to $1.1055, the Japanese yen strengthened 1.57% versus the greenback at 107.92 per dollar, while Sterling was last trading at $1.2367, up 1.36% on the day.

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

“What we are seeing is abating stress in the money markets. Action by central banks has been successful so far and a shortage of dollars has been taken off the table,” said Ulrich Leuchtmann, head of FX and EM research at Commerzbank.

U.S. Treasury yields were headed for a weekly decline, though the range of trading was far less volatile than in the previous two sessions.

Benchmark 10-year notes last rose 22/32 in price to yield 0.7377%, from 0.808% late on Thursday. The 30-year bond last rose 1-26/32 in price to yield 1.3267%, from 1.395%.

Oil prices continued their fall on demand concerns as the virus slowed economies to a crawl, which outweighed the stimulus efforts.

U.S. crude recently fell 5.44% to $21.37 per barrel and Brent was recently at $24.54, down 6.83% on the day.

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.

Spot gold dropped 0.3% to $1,623.82 an ounce. The metal was on track to post its largest weekly advance since 2008.

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World News

Kelowna psychologist on the psychological impact of COVID-19 in extended interview

We’re staying inside, staying apart and working from home to try to flatten the curve. It’s all to help prevent the spread of COVID-19.

It’s also a crucial time to also care for our mental health, according to Dr. Heather McEachern, a psychologist at the Kelowna Psychologists Group.

“The anxieties we are seeing in our office currently are basically health anxiety that even people that have never experienced before will have by varying degrees and even obsessive-compulsive tendencies,” said Dr. McEachern.

If you are experiencing these feelings or experiencing depression, she says, there are some coping mechanisms you can use.

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Business

Asia stocks rise on bets of more stimulus as dollar rally fades

TOKYO (Reuters) – Asian stocks rose on Friday as investors wagered policymakers will roll out additional 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 1.0%. Australian shares were up 2.02%, while Japan’s Nikkei stock index rose 3.65%.

E-Mini futures for the S&P 500 rose 0.81% 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 coronavirus pandemic ground the country to a sudden halt, data showed on Thursday.

The jobless blowout was announced shortly after Federal Reserve Chairman Jerome Powell said that 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 because most central banks have already aggressively eased policy and governments are backing this up with big fiscal spending.

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 and “do whatever it takes to overcome the pandemic.”

In the currency market, the greenback fell 0.25% to 109.34 yen in Asia on Friday, on pace for a 1.3% weekly decline.

The dollar was also headed for weekly declines against the Swiss franc, the pound, and the 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 0.8383%, while the two-year yield edged up to 0.2946%.

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 1.77% to $23 a barrel in Asia. Energy markets have been caught in a tug-of-war between hopes for stimulus spending and worries about excess supplies of crude.

Gold, normally bought as a safe haven, was slightly lower. Spot gold fell 0.30% to $1,626.58 per ounce. [GOL/]

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

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Business

Ten signs the oil industry is bent out of shape

(Reuters) – The oil industry has been hit by a simultaneous demand and supply shock in March as the coronavirus pandemic cuts fuel consumption and top producer Saudi Arabia raises output to full capacity to fight a price war with rivals.

International crude oil prices have lost about 45% this month and fallen below the cost of much of the world’s production, causing energy companies worldwide to slash spending by tens of billions of dollars.

The collapse in demand and of energy diplomacy between Saudi Arabia, Russia and others have triggered unprecedented responses from governments and investors. Here are ten signs of an industry in distress.

SAUDI ARABIA GOES ALL-IN

Riyadh shocked the oil industry by going on the offensive after talks collapsed with Russia in early March on a deal to cut supply to compensate for how coronavirus was hitting demand.

Saudi Arabia slashed export prices and said it would pump at a record of 12.3 million barrels per day, pouring a flood of oil into a market that needed less. It lined up an armada of ships for export, targeting refiners that buy Russian crude, as well as the United States, wiping out profit margins for U.S. exports.

The moves were all the more shocking coming from a producer that for years has had a role akin to the industry’s central bank. The kingdom is the de facto leader of the Organization of the Petroleum Exporting Countries (OPEC) and for decades adjusted output more than any other oil producer to keep markets balanced.

TEXAS CONSIDERS CUTTING PRODUCTION?

Producers in top U.S. producing state Texas went to regulators – and asked them to intervene to cut production. Texas does not intervene that much. The last time was in 1973. To be sure, other Texas commissioners and oil industry groups have thrown cold water on the idea.

WITH OPEC?

One of three Texas commissioners at the body that regulates the industry got a call from the secretary general of OPEC to discuss the market. Commissioner Ryan Sitton said on Friday that Texas could consider a 10% output cut, possibly in coordination with that group. Before now, U.S. shale oil producers dared not consider coordinated cuts for fear of violating U.S. anti-trust laws.

HISTORIC SELLOFFS

Three of the steepest declines in benchmark Brent crude have taken place in the last two weeks – March 9, March 16, and March 18

On March 9, Brent dropped 24%.

On March 16, Brent dropped 11%

On March 18, Brent dropped 13%.

On March 23, the U.S. gasoline market plummeted the most ever in one day, as futures lost 32% to hit a record low.

(GRAPHIC: Global Oil Slump – here)

JET FUEL IN STORAGE

Jet fuel deteriorates quickly in storage, and then it cannot be used. Yet demand has fallen so fast as airlines ground aircraft around the world that firms including oil majors BP (BP.L) and Royal Dutch Shell (RDSa.L) both sought to lease ships just to store unneeded jet fuel.

REFINING GASOLINE COSTS MONEY

You want to make gasoline? It’ll cost you. On Monday, the margins to produce U.S. gasoline – the price for a barrel of oil minus a barrel of gasoline – closed at a negative price, which means refiners would lose money buying crude to make the fuel. Gasoline typically drives the energy complex, as fuel for vehicles accounts for most oil demand worldwide. The margin fell to minus $1.11 a barrel on Monday, its lowest since 2008.

RUSSIA DIGS IN, ROSNEFT CELEBRATES SHALE WOES

Rosneft (ROSN.MM) Chief Executive Igor Sechin was unwilling to give ground as the U.S. shale industry faced collapse. Oil prices could go back to $60 a barrel if “shale oil leaves markets,” he said on Friday. On Monday, his rival, Lukoil (LKOH.MM) co-owner Leonid Fedun, said “this will be a war until exhaustion.”

ETHANOL? NEVER MIND

Corn and sugar supplies look set to rise this year as fuel suppliers make less ethanol for blending into gasoline. Companies such as France’s Tereos are shifting ethanol production to industrial uses like hand sanitizer, while sugar producers in Brazil are aiming to make more of the sweetener rather than the fuel.

LATE-DAY CRAZINESS

Volatility in oil markets has been exacerbated as oil companies stay out. That leaves speculators, and makes for rapid moves in prices around the close of trading. Thursday’s rally was so great that post-close trading had to stop; Friday was the reverse, with prices that dove by $4 at the end of trading.

“It’s a crazy market. I don’t know how to trade this,” one futures trader said.

REFINERS STAY SHUT

French major Total (TOTF.PA) shut its Grandpuits refinery, located outside of Paris, early in March for maintenance. When it was time to restart the 102,000 barrel-per-day facility, Total said…never mind. Demand weakened so quickly that it figured it would just keep it offline. While others have closed, major refiners outside Los Angeles, California, have curtailed production because of lackluster demand.

PETROL PUMPING BECOMES UNSAFE

One of the nations hit worst by the coronavirus pandemic, Italy, is simply shutting its petrol stations. They started to close on March 25 on the nation’s motorways, operators there said, because it was impossible to guarantee health safety standards and keep businesses going.

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Business

Stocks run out of steam on U.S. job jitters, yen gains

SINGAPORE (Reuters) – A two-day equities rally lost momentum on Thursday, and investors sold riskier currencies, as stimulus negotiations dragged on in Washington and investors fretted over a likely spike in U.S. jobless claims.

MSCI’s broadest index of Asia-Pacific shares outside Japan wobbled either side of flat. Japan’s Nikkei slumped 4% and U.S. stock futures fell 1%.

The dollar climbed around 1% against the Australian and New Zealand dollars and the yen rose 0.4% against the dollar as investors sought shelter.

“We are not out of the woods just yet,” said Stephen Daghlian, at brokerage CommSec in Sydney. “There are plenty of risks in the next couple of weeks.”

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

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

The Fed’s promise of unlimited bond buying has eased some of the virus-driven financial stress this week. But Powell is also likely to be asked about the real economy, and the apparent divide between health officials and President Donald Trump as to how quickly the country can return to work.

Meanwhile, as Senate leaders in United States hoped to vote on the stimulus package late in the Washington night, markets’ patience and optimism are beginning to waver.

“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. “A lot of companies have withdrawn earnings guidance…these are still ahead of us. We don’t know how bad it could be.”

Hong Kong’s Hang Seng was down 0.5% by mid-morning while regional trade was mixed. Indexes in China posted meager gains and Australia, Indonesia and Thailand advanced.

JOBLESS CLAIMS TO TEST BOUNCE

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

Singapore’s economy suffered its biggest contraction in a decade in the first quarter, data showed on Thursday, as the coronavirus pandemic prompted the city-state to cut its full-year GDP forecast and plan for a deep recession.

Spain’s coronavirus death toll has overtaken China’s and a total of 21,221 people have died globally.

California Governor Gavin Newsom told reporters on Wednesday that a million Californians had already applied for jobless benefits this month – a number that knocked stocks from session highs and has analysts bracing for even worse to come.

RBC Capital Markets economists had expected a national figure over 1 million in Thursday’s data, but say “it is now poised to be many multiples of that,” as reduced hours across the country 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 could reach 15-18% of the total U.S. workforce, some 25 million people.

In currencies, the mood was to duck and cover. The Australian dollar fell 1.3% to $0.5879 and the pound fell half a percent to $1.1833.

The safe haven yen rose to 110.70 per dollar.

Oil steadied with stimulus hopes offsetting fears of plunging demand. U.S. crude futures slipped 35 cents to$24.14 per barrel and Brent crude futures fell 0.9% to $27.15.

Gold fell 1% to $1,597.91 per ounce.

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Politics

U.S. Republican lawmaker urges State Department to boost diplomacy on oil price war

WASHINGTON (Reuters) – A top Republican lawmaker urged a U.S. State Department official on Wednesday to press ahead with diplomatic efforts to end the oil price war between Saudi Arabia and Russia that is harming U.S. oil producers.

Representative Michael McCaul applauded Secretary of State Mike Pompeo’s emphasis, in a call with Saudi Arabia’s Crown Prince Mohammed bin Salman, on the need for stability in global oil markets.

“I urge you to continue diplomatic engagement to help stem the devastating economic implications of the ongoing price war between Saudi Arabia and Russia,” McCaul said in the letter to Keith Krach, the undersecretary of state for economic growth, energy and the environment.

“We cannot… allow our industries to become the victim of someone else’s price war, so I ask you to continue utilizing every tool at your disposal to press Saudi Arabia and Russia to cut production.”

The price war and a demand drop related to the coronavirus pandemic have about halved U.S. oil prices, below $25 a barrel on Wednesday. [O/R]

McCaul, the top Republican on the U.S. House Committee on Foreign Affairs, represents Texas, one of the top U.S. oil producing states.

It was not clear exactly what the Trump administration can do to push Saudi Arabia or Russia to boost oil output. Wars over market share can sometimes last months.

Daniel Yergin, vice chairman of IHS Markit, and an energy historian, said the price war may require collaboration in a broad framework such as the G20, which Saudi Arabia is chairing this year.

“That would permit a discussion going beyond the present Russia-Saudi impasse, bringing in the United States and a larger group of producers and consumers, including Brazil, China, France,” and others, Yergin wrote in an opinion piece in the Washington Post this week.

McCaul’s letter was the latest effort by Republican lawmakers to push the administration to find an end to the price war. Earlier this month 10 Republican senators, mostly from energy producing states, urged Trump to impose an embargo on oil from Russia and Saudi Arabia.

The U.S. Energy Department will soon send Victoria Coates, who recently handled Middle East issues on the White House national security council, to Riyadh as a special energy envoy to work on stabilizing energy markets.

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Economy

GLOBAL MARKETS-Asian shares ride Wall St surge as investors pin hopes on U.S. stimulus

* MSCI ACWI builds on biggest gains since 2008 financial crisis

* Gold retain gains after big jump

* Dollar slides as funding squeeze eases a little

* European shares seen slightly higher

* Asian stock markets: tmsnrt.rs/2zpUAr4

By Hideyuki Sano

TOKYO, March 25 (Reuters) – Asian shares gained on Wednesday in the wake of Wall Street’s massive rebound as U.S. senators and Trump administration officials reached an agreement on a giant economic stimulus bill to alleviate the economic impact of the coronavirus outbreak.

European benchmark stock futures rose more than 1% in early trade but U.S. stock futures were down 1% as the news about the deal invited profit-taking after big gains the previous day.

“No doubt it’s a positive development that they’ve agreed… But once it is approved the question is how it is implemented,” said Jason Teh, chief investment officer at Vertium Asset Management in Sydney.

“It’s good the authorities are going to throw everything at it. But if the virus is not controlled in the U.S., then they’re going to have to throw another trillion dollars.”

MSCI’s broadest index of Asia-Pacific shares outside Japan gained 3.4% while Japan’s Nikkei surged 6.9%.

“Japanese shares have been bolstered by aggressive buying from the Bank of Japan and pension money this week. That has prompted hedge funds to cover their short positions,” said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities.

MSCI’s gauge of stocks across the globe was up 1.0%, having rallied 8.39% on Tuesday, the largest single-day gain since the wild swings seen during the height of the global financial crisis in October 2008.

On Wall Street, the Dow Jones Industrial Average soared 11.37% on Tuesday, its biggest one-day percentage gain since 1933.

Yet, much of the large gains in stock markets pale in comparison with the brutal selloff of the past few weeks as investors braced for a deep global recession due to the pandemic and sweeping lockdowns in many countries.

The U.S. S&P500 is still down almost 28% from its record peak hit just over a month ago.

“Many analysts have recently put out dire economic forecasts, like annualised rate of 20% fall in U.S. GDP next quarter. Europe and Japan should also see double-digit contractions,” said Nobuhiko Kuramochi, chief strategist at Mizuho Securities.

“I suspect the outlooks have sunk in among market players already and that the bear market has run about 80% of its course for now.”

STIMULUS

The U.S. stimulus deal, billed as a $2 trillion package, is expected to include $500 billion in direct payments to people and $500 billion in liquidity assistance.

Investor fears about a sharp economic downturn also appear to be easing somewhat after the U.S. Federal Reserve’s offer of unlimited bond-buying and programmes to buy corporate debt.

“Companies will see their revenues sink and indebted firms will have trouble securing cash, so governments are making the right responses,” said Akira Takei, senior fund manager at Asset Management One.

“The question is, while those responses are necessary in the near term, what if this continues? You can’t keep helping companies that continue to make losses. The longer this drags on, the more likely we will need to adjust to a new normal.”

The biggest uncertainty is on how countries can slow the pandemic and how quickly they can lift various curbs on economic activity.

U.S. President Donald Trump pressed his case for a re-opening of the U.S. economy by mid-April.

But that met immediate scepticism given the rise of infections in the United States is now among the highest in the world, with the total cases reaching more than 50,000 – doubling in less than three days.

In particular, its financial hub of New York City suffered another quick and brutal rise in the number of infections to around 15,000, raising worries about a shortage of hospital beds.

In the currency market, the dollar slipped as a greenback liquidity crunch loosened slightly.

The euro traded at $1.0808 up 0.15% after four straight days of gains.

The dollar stood flat at 111.16 yen, off a one-month high of 111.715 touched the previous day.

Gold changed hands at $1,610.0 per ounce retaining its gains of almost 5% on Tuesday, its biggest jump since 2008.

Oil prices bounced back as hopes for U.S. stimulus offset fears of falling global demand.

India, the world’s third largest oil consumer, ordered its 1.3 billion residents to stay home for three weeks, the latest big fuel user to announce restrictions on social movement, which have destroyed demand for gasoline and jet fuel worldwide.

The market remained pressured by a flood of supply after Saudi Arabia started a price war earlier this month, a move that dealt a crushing blow to markets already reeling from the pandemic.

U.S crude futures rose 4% to $24.96 per barrel. That is up about $5.5, or about 26%, from their 18-year intraday low of $19.46 touched on Friday. Still on the month, the market is down 44%. (Editing by Sam Holmes & Shri Navaratnam and Lincoln Feast.)

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Economy

GLOBAL MARKETS-Stocks, gold surge on new stimulus from Fed, others

(Adds gold, oil settlement prices)

* Stocks rally in biggest single-day bounce in month

* Major indexes post best gains since 2008 financial crisis

* Investors relieved as Fed pledge eases bond stress

* Factory surveys show extent of economic damage

By Herbert Lash, Sujata Rao and Marc Jones

NEW YORK/LONDON, March 24 (Reuters) – Financial markets rebounded sharply on Tuesday, with a measure of global equities headed for its biggest bounce since the crisis erupted a month ago, while the safe-haven dollar recoiled as investors welcomed unprecedented global stimulus efforts.

Investors hoped the U.S. Federal Reserve’s offer of unlimited bond-buying would help avert a global depression with the help of other rescue packages, though it was not expected by itself to mitigate the devastating impact of the coronavirus.

The Fed’s action had failed to persuade Wall Street on Monday, with losses of 2%-3% on major indexes. But the mood improved on Tuesday as other governments and central banks stepped in and Congress readied a $2 trillion stimulus package to limit the economic fallout from the fast-spreading pandemic.

U.S. gold futures climbed as much as 6.7% to $1,672.60 an ounce as the moves by the Fed and others eased the need for cash and slashed the demand for dollars.

“The Fed’s measures are unprecedented, and they have been extremely proactive in preventing this external shock from morphing into a wider funding crisis,” said Vasileios Gkionakis, head of FX strategy at Lombard Odier.

U.S. and European stocks jumped 6% or more and the dollar index, a basket of major trading currencies, slid.

MSCI’s gauge of stocks across the globe gained 7.00%, the largest single-day gain since equities tumbled from all-time highs a month ago.

The broad pan-European STOXX 600 index rose 8.40%, its strongest session since late-2008. The index is still down about 30% from a record peak hit in February.

German stocks jumped 11% and British blue chips added 9% as both bourses also posted their best sessions since the global financial crisis in 2008.

Europe’s so-called fear gauge fell to 52.53, its lowest in nearly two weeks, after spiking to 12-year highs earlier this month.

Emerging market stocks rose 6.04%.

On Wall Street, the Dow Jones Industrial Average rose 1,591.77 points, or 8.56%, to 20,183.7. The S&P 500 gained 158.39 points, or 7.08%, to 2,395.79 and the Nasdaq Composite added 429.93 points, or 6.27%, to 7,290.61.

The Fed also will expand its mandate to corporate and municipal bonds and backstop a series of other measures that analysts estimate will deliver more than $4 trillion in loans to non-financial firms.

Other countries unveiled their own measures. South Korea’s ravaged market climbed 8.6% after the government doubled a planned economic rescue package to 100 trillion won ($80 billion).

In China, mainland stocks posted their biggest gain in three weeks of almost 3%, while Japan’s Nikkei soared 7%, its biggest daily gain in four years.

Still, investors remained wary, as the number of coronavirus infections topped 350,000 and new infections brought in from abroad rose in China.

Business activity collapsed from Australia and Japan to Western Europe at a record pace in March, as measures to contain the coronavirus hammered the world economy, and Japan said it was postponing the Olympics.

IHS Markit’s flash composite Purchasing Managers’ Index (PMI) for the euro zone, seen as a good gauge of economic health, plummeted to a record low of 31.4 in March, in the biggest one-month fall since the survey began in 1998.

With no resolution to the pandemic and not enough visibility into the depth of the economic downturn, it’s too early to call the end to the market’s rout, said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey.

“The answer is still, ‘you got to get it under control,’” Saluzzi said about the coronavirus. “Everybody keeps saying it’s going to get worse before it gets better, so the markets are going to remain choppy and volatile.”

The government and central bank financial support helped calm nerves in bond markets, where yields on two-year U.S. Treasuries hit their lowest since 2013.

The benchmark 10-year U.S. Treasury note fell 15/32 in price to yield 0.8148%.

Germany’s 10-year yield was up 2 basis points on the day at -0.36%, compared with a 4 bps rise before the purchasing managers index (PMI) releases, all small moves when compared to record lows hit at -0.90% earlier in March.

ALL ABOUT THE ECONOMY

The impact of the virus on the global economy is evident in a series of growth forecast downgrades and advance readings of PMIs across the world’s biggest economies.

German activity plunged to the lowest since the 2009 crisis, driven by a record services contraction, while French activity hit all-time lows. Japan posted its biggest-ever services fall.

However, the prospect of massive Fed funding pushed the greenback 0.26% lower against rivals, off three-year peaks , falling against the yen and sliding 1% versus the euro.

Brent futures rose 12 cents to settle at $27.15 a barrel, while U.S. West Texas Intermediate (WTI) crude rose 65 cents to settle at $24.01.

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Business

Asian stocks rebound, Fed soothes with boundless QE

SYDNEY/HONG KONG (Reuters) – Asian equities markets rallied on Tuesday as investors bet the U.S Federal Reserve’s promise of unlimited dollar funding would ease painful strains in financial markets even if it could not stop the economic hit of the coronavirus epidemic.

While Wall Street seemed unimpressed, investors in Asia were encouraged enough to lift E-Mini futures for the S&P 500 by 4.2% and Japan’s Nikkei shot up 7.13%, its biggest daily rise since February 2016.

The prospects for Tuesday’s European session also looked brighter as EUROSTOXXX 50 futures and FTSE futures both rose 4.9%.

MSCI’s broadest index of Asia-Pacific shares outside Japan jumped 4.9%, to more than halve Monday’s drop.

South Korea’s ravaged market climbed 8.6% after the government doubled a planned economic rescue package to 100 trillion won ($80 billion).

K2 Asset Management head of research George Boubouras said despite gains on Tuesday in Asian equities, financial market sentiment remained fragile even as the co-ordinated stimulus measures were implemented around the world.

“The biggest trigger for positive sentiment in these markets will be a flattening of the trajectory for the virus,’ he told Reuters by phone from Melbourne.

“Economies around the world are going offline and that is devastating for economic activity, it’s creating the most robust dislocation in financial markets in living memory.”

Central banks and governments, he said, needed to implement ‘bold and innovative’ monetary and fiscal policies to stave off the prospect of a damaging credit crunch hitting global financial systems.

“It is not a credit crunch yet and it liquidity measures are critical to stopping that,” he said.

Macquarie Wealth Management divisional director Martin Lakos said the speed of the equity market decline made the current sell-off arguably worse then the 2008 global financial crisis.

“The falls that we have seen have been breathtaking, and it is the speed of those declines that have caught people by surprise,” he said.

“If the number of cases start to stabilize, and that gives investors confidence then we could start to see them revert to fundamentals. Markets are not trading on fundamentals right now.”

In its latest mold-breaking step, the Fed offered to buy unlimited amounts of assets to steady markets and expanded its mandate to corporate and municipal bonds.

Analysts estimated the package could make $4 trillion or more in loans to non-financial firms.

“What they did, more than just starting up some new programs, was to drive home they are willing to do whatever it takes,” said Tom Porcelli, chief U.S. economist at RBC Capital Markets. “We would not call into question their resolve.”

The plan helped calm nerves in bond markets where yields on two-year Treasuries hit their lowest since 2013. Ten-year yields were at 0.8339%, from last week’s peak of 1.28%.

Still, 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.

Economists at JPMorgan expect claims to surge by a record 1.5 million and forecast a 14% annualized fall in U.S. gross domestic product for the second quarter. They see European GDP down almost 24% and Latin America 12%.

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

For now, the prospect of massive U.S. dollar funding from the Fed saw the currency ease back to 110.32 yen from Monday’s one-month top of 111.56.

The euro bounced 0.5% to $1.0797, 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 1.8% to $0.5937 and away from a 17-year low of $0.5510.

Gold surged in the wake of the Fed’s pledge of yet more cheap money, and was last up 1% at $1,569.70 per ounce having rallied from a low of $1,484.65 on Monday.

There were also signs that gold metal itself was in short supply with the premium on exchange for physical blowing out.

Oil prices also bounced after recent savage losses, with U.S. crude up $1.08 cents at $24.44 barrel. Brent crude firmed $1.09 to $28.12.

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Economy

REFILE-GLOBAL MARKETS-Asia stocks rally, Fed launches limitless QE against economic reality

(Clarifies Goldman Sachs forecast refers to output in paragraph 11)

* Asian stock markets : tmsnrt.rs/2zpUAr4

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

* 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 rallied 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 seemed unimpressed, investors in Asia were encouraged enough to lift E-Mini futures for the S&P 500 by 1.9% and Japan’s Nikkei by 4.9%.

MSCI’s broadest index of Asia-Pacific shares outside Japan added 1.2%, though that followed a drop of almost 6% on Monday. South Korea and Australia also recouped a little of their recent losses.

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. economy 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.

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 $1.0754 from a three-year trough of $1.0635.

The dollar index stood at 102.120, off a three-year peak of 102.99.

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 after recent savage losses, with U.S. crude up 64 cents at $24.00 barrel. Brent crude firmed 53 cents to $27.56.

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