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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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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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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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Dollar surges, stocks fall as ECB fails to stop panic

SINGAPORE (Reuters) – The dollar surged, bonds plunged and global markets struggled to find their footing on Thursday as the European Central Bank’s latest promise of stimulus provided only brief solace while the world struggles to contain the coronavirus pandemic.

U.S. stock futures EScv1 fell 2%. The Australian dollar was crushed, falling 3.3% to a more than 17-year low, and Asian markets gave up initial gains made after the ECB had announced a bond-buying program.

By midmorning, MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS had fallen 4% to an almost four-year low. Australia’s benchmark erased an early 3% rise to trade 2% in the red.

Korea’s Kospi .KS11 fell 6% and the won hit a decade-low even as the central bank was buying dollars to prop up the currency. Markets in Hong Kong and China fell.

“We’re in this phase where investors are just looking to liquidate their positions,” said Prashant Newnaha, senior interest rate strategist at TD Securities in Singapore.

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.

The ECB on Wednesday pledged to 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 follows emergency interest rate cuts around the globe, enormous fiscal support packages and six central banks promising discount dollars 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.

“Liquidity is not the problem this time around,” said Michael McCarthy, chief market strategist at brokerage CMC Markets in Sydney.

“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.”

SELL EVERYTHING

Selling extended across almost all asset classes. Benchmark 10-year sovereign bond yields in Australia, New Zealand, Malaysia, Korea and Singapore and Thailand surged.

In currency markets, everything except the dollar and – thanks to the ECB, the euro – collapsed. Sterling GBP= fell 1% to $1.1495. The New Zealand dollar NZD=D3 fell 3% to $0.5540 and the Aussie AUD=D3 was pounded to $0.5592.

The Reserve Bank of Australia is due to make an out-of-cycle policy announcement at 0330 GMT at which it is expected to cut rates and introduce quantitative easing for the first time.

U.S. 10-year Treasuries US10YT=RR, usually a haven in times of turmoil, were steady but have suffered their sharpest two-day selloff in nearly 20 years.

Gold XAU= is down 3% for the week.

“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.”

And the virus outbreak has worsened. Italy on Wednesday reported the largest single-day death toll increase 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.

Investors are 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.

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.

Oil bounced back in Asian trade, with U.S. crude CLc1 last up 12% to $22.73 and Brent LCOc1 up $1.66 to $26.54.

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Wall Street slumps, government bonds hammered as stimulus high fades

LONDON (Reuters) – Wall Street resumed a steep slide on Wednesday while bond markets rushed to price in the sheer scale of government support programs and handouts announced over the past 24 hours, all aimed at softening the economic shock of coronavirus.

Dire trading conditions continued to make two-way trading difficult and exaggerated the moves as investors piled into cash with the selloff in government bonds in particular drawing European Central Bank support for the Italian debt market.

U.S. dollar funding stresses remain evident, even if slightly easier since the U.S. Federal Reserve’s latest support for commercial paper and securities repurchase markets Tuesday.

Even the usual safe-haven assets, such as gold, got caught in the rout as battered investors looked to unwind their damaged positions while oil prices tanked to a 18-year low below $30.

“Another remarkable day in what is clearly fin-de-regime,” Rabobank’s global strategist Michael Every wrote in a note.

“Things have already irrevocably changed and whipsaw market action reflects that this is the case. The only issue is how much further they change from here, and hence where markets settle.”

Wall Street’s main indexes slumped at the open as growing signs of coronavirus damage to corporate America saw Tuesday’s sugar high over sweeping official moves to protect the economy fade fast.

The Dow Jones Industrial Average fell 1,048.69 points or nearly 5% at the open to 20,188.69, while the S&P 500 opened lower by 92.69 points, or 3.7% at 2,436.50. The Nasdaq Composite dropped 432.47 points or nearly 6%.

The declines follow sharp tumbles in Europe where equity indexes in London, Frankfurt and Paris plunged around 5% and Milan slipping around 2%. MSCI’s global stocks index dropped nearly 4% .

In Asia, the MSCI’s broadest index of Asia-Pacific shares outside Japan dropped 4% to lows last seen in summer 2016, led by a 6.4% fall in Australia. Japan’s Nikkei dipped 1.7%.

(Graphic: Market selloff speed, severity eclipses previous dislocations, here)

Bond markets joined the selling as liquidity vanished from European fixed income.

Italy’s debt found itself at the center of the sell-off with borrowing costs soaring, on track for their biggest daily jump since the 2011 euro zone debt crisis. The rout quickly spread to Spanish, Portuguese and Greek yields. Safe-haven German 10-year debt yields jumped to two month highs at -0.2%. [GVD/EUR]

In Europe, speculation grew around the issuance of joint euro zone “coronavirus” bonds or a European guarantee fund to help member states finance urgent health and economic policies.

“The liquidity situation is horrendous. What we see if liquidity is completely drying up when one-way selling starts and no one wants to take the other side,” Salman Ahmed, investment strategist at Lombard Odier.

“In the pre-crisis era, banks would step in and buffer the shock. Now there are no banks, only mutual funds which are having a run on their funds — it’s all impatient money.”

Big price swings have saddled market participants with losses, making them reluctant to get back into the market and thereby reducing trading volume.

Benchmark U.S. 10-year Treasury yield touched a three-week high of 1.2260 after the Federal Reserve eased some market jitters. U.S. 30-year bond yields climbed as high as 1.8440%.

“We are in the midst of the mayhem really, and I think there is still a risk that the increasing number of infections will keep markets on their toes,” said Hans Peterson global head of asset allocation at SEB investment management.

“It is hard to know how deep the recession will be, and as long as we have that situation it is hard to lift sentiment.”

BRIEF SUGAR HIGH

Wall Street had enjoyed a brief sugar-high on Tuesday after policymakers cobbled together packages to counter the impact of the virus.

The Trump administration announced a $1 trillion stimulus package that could deliver $1,000 cheques to Americans within two weeks to buttress a virus-stricken economy.

Britain launched a 330 billion-pound ($400 billion) rescue package for businesses threatened with collapse. France, which went into lockdown on Tuesday, is to pump 45 billion euros ($50 billion) into its economy to help companies and workers.

Still, forecasters at banks are projecting a steep economic contraction in at least the second quarter as governments take draconian measures to combat the virus, shutting restaurants, closing schools and calling on people to stay home.

Tuesday saw also the Fed step in again to ease corporate funding stress by reopening its Commercial Paper Funding Facility to underwrite short-term corporate loans.

In currency markets, the dollar extended its gains with the index against a basket of currencies up 0.6% to trade at a near-three year high of 100.61.

The dollar also hit multi-year highs against both the Australian and New Zealand dollars, as companies and investors worried by the coronavirus outbreak headed for the world’s most liquid currency. The pound tumbled below 1.20 to the dollar, trading at its lowest level since October 2016.

Perceived safe havens such as the Japanese yen and the Swiss franc held their ground.

Oil prices fell for a third session, with U.S. crude futures tumbling to an 18-year low and Brent hitting a more than 16-year low as travel and social lockdowns to counter the coronavirus raised prospect of the steepest ever annual fall in oil demand.

U.S. crude was down $3.25, or about 12%, at $23.70 a barrel by 1322 GMT, having earlier touched its lowest since April 2002 at $23.60.

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