Categories
Economy

WRAPUP 2-TSX and Canadian dollar gain as economic aid encourages investors

 (Updates prices)
    * TSX gains 1.8% as Ottawa boosts stimulus
    * Canadian dollar rises 1% against the greenback
    * Loonie touches its strongest since March 17 at 1.4010
    * Canadian bond yields fall across the curve

    By Fergal Smith
    TORONTO, March 26 (Reuters) - Canada's main stock market
rallied for a third straight day and the loonie rose to a
nine-day high on Thursday as Ottawa tripled the size of a
mortgage securities buying program, with investors becoming more
impressed with the amount of economic aid.
    Canada said it was ready to buy C$150 billion of mortgage
securities, up from C$50 billion announced earlier this month,
to expand funding for lenders dealing with tighter credit
markets due to the economic impact of the coronavirus outbreak.
            
    On Wednesday, Canada almost doubled the value of an aid
package to C$52 billion to help people and businesses deal with
losses from the outbreak, while the Bank of Canada has cut its
key interest rate by a total of 100 basis points this month to
0.75%.             
    Some economists expect the central bank to cut rates to zero
and begin purchasing in large scale assets such as government
bonds.        
    "Fear over how long coronavirus containment measures could
last are starting to be offset by encouragement that fiscal and
monetary support measures are underway to support Canadians and
Canadian companies," said Colin Cieszynski, chief market
strategist at SIA Wealth Management.
    The Toronto Stock Exchange's S&P/TSX composite index
          ended up 1.8% at 13,371.17, its highest closing level
since March 13. The index has rebounded nearly 20% from Monday's
8-year low.
    The heavily-weighted financials group rallied 1.7%, while
industrials were up 3.3%.
    Wall Street also rallied as record weekly unemployment
benefit claims added to the case for more stimulus to combat the
economic impact of the coronavirus pandemic, while the U.S.
dollar        fell for a fourth straight day against a basket of
major currencies.             
    The Canadian dollar          was trading 1% higher at 1.4056
to the greenback, or 71.14 U.S. cents. The currency, which on
Wednesday notched its biggest gain in four years, touched its
strongest intraday level since March 17 at 1.4010.
    The price of oil, one of Canada's major exports,       
settled 7.7% lower at $22.60 a barrel as restrictions on travel
worldwide slashed fuel demand and the United States scrapped
plans to buy domestic oil for its emergency reserve.
            
    Canadian government bond yields fell across the curve in
sympathy with U.S. Treasuries. The 10-year             was down
5.2 basis points at 0.850%.

 (Reporting by Fergal Smith; editing by Nick Zieminski and
Alistair Bell)
  

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Categories
Business

Asian markets tread cautiously ahead of U.S. stimulus, jobs

SINGAPORE (Reuters) – Asian stock markets made a cautious start on Thursday following two days of rallies, as investors await the passage and details of a $2 trillion stimulus package in the United States to combat the economic fallout from the coronavirus.

Senate leaders hope to vote on the plan later on Wednesday in Washington, but it still faces criticism. The bill includes a $500 billion fund to help hard-hit industries and a comparable amount for payments up to $3,000 to millions of U.S. families.

It cannot come soon enough, with potentially enormous weekly U.S. initial jobless claims to appear in data due at 1230 GMT.

Australia’s S&P/ASX 200 index rose 1.5% in early trade – its third positive start in as many sessions, but also its most muted. Japan’s Nikkei fell 2.2%.

Hong Kong futures were 1% higher and China A50 futures were up 0.2%. MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.3%.

“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, adding that investors were largely flying blind with so many companies withdrawing earnings guidance. Jobless figures may offer a “reality check,” she said.

In perhaps an early sign of the fragile mood, the risk-sensitive Australian dollar dropped 1% and the safe-haven Japanese yen rose in morning trade. [FRX/]

U.S. stock futures rose 1%, following the first back-to-back session rises on Wall Street in over a month.

The Dow Jones Industrial Average rose 2.4% and the S&P 500 1.2%, while the Nasdaq Composite dropped half a percent following a Nikkei report that Apple was weighing a delay in the launch of its 5G iPhone.

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 as jobless claims are set to soar, with both expected to test the nascent bounce in markets this week.

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 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. Forecasts in a Reuters poll range from a minimum of 250,000 initial claims, all the way up to 4 million.

Trepidation seemed to put a halt on the U.S. dollar’s recent softness in currency markets, with the dollar ahead 1% against the Antipodean currencies and up 0.6% against the pound.

It slipped 0.3% to 110.85 yen.

U.S. crude slipped 1.5% to $24.11 per barrel and gold steadied at $1,608.14 per ounce.

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Categories
Economy

GLOBAL MARKETS-Stocks rebound further as markets await $2 trillion U.S. stimulus boost

(Adds oil settlement prices, details)

* MSCI world index adds to biggest climb since 2008 crisis

* Wall Street also on track for back-to-back gains

* Gold retain most of advance after big jump

* Dollar slips as markets wait for U.S. stimulus package

* Graphic: World FX rates in 2020 tmsnrt.rs/2egbfVh

By Herbert Lash and Marc Jones

NEW YORK/LONDON, March 25 (Reuters) – The dollar slid and global equity markets marched higher on Wednesday, poised for a second day of gains on optimism $2 trillion in U.S. fiscal stimulus will dampen the economic shock the coronavirus pandemic already has started to inflict.

U.S. senators will vote Wednesday. Top aides to Republican President Donald Trump and senior Republican and Democrat senators agreed on the unprecedented bill after five days of marathon talks.

Hopes the bill, which is nearly half the $4.7 trillion the U.S. government spends annually, will ease an expected recession lifted world stock indexes for back-to-back gains for the first time since markets sold off a month ago.

Europe’s main markets in London, Frankfurt and Paris were struggling to stay positive after ripping 4%-5% higher and oil prices swung from 3% up to 3% down. Wall Street also teetered though it mostly remained more than 1% higher.

The Dow Jones Industrial Average soared more than 11% on Tuesday in its biggest single-day percentage gain since 1933 and the benchmark S&P 500 jumped 9.4% – its tenth best day on record out of 24,067 trading sessions since a daily data series started in 1927.

The stimulus package marks progress but the devil’s in the details, said Ron Temple, head of U.S. equity at Lazard Asset Management in New York. The legislation is not available to read to know how it will be executed or when money arrives at households and small businesses gain access to funding, he said.

“This is not the all-clear; it’s just material progress,” Temple said.

“Until we know we can go back to work safely, that we can go to restaurants and go to stores and engage with other humans in close proximity, I don’t think you can make an economic or a market call. It’s premature to be trying to call the bottom.”

The stimulus includes a $500 billion fund to help hard-hit industries and a comparable amount for direct payments of up to $3,000 apiece to millions of U.S. families.

It will also include $350 billion for small-business loans, $250 billion for expanded unemployment aid and at least $100 billion for hospitals and related health systems.

Countries that have locked down their populations to prevent the spread of the coronavirus need to use the time to find and attack the virus, the World Health Organization said.

As the United States works to screen thousands for the coronavirus, a new blood test offers the chance to find out who may have immunity – a potential game changer in the battle to contain infections and get the economy back on track.

Over 450,000 people have been infected globally and more than 20,000 have died, according to a Reuters tally.

Data on Wednesday pointed to a fast-slowing economy that analysts said signaled the United States already is in recession.

New orders for key U.S.-made capital goods fell sharply in February as demand for machinery and other products slumped, suggesting a deepening contraction in business investment.

The benchmark S&P 500 is still nearly $8 trillion below its mid-February high, and investors expect more sharp swings. Wall Street’s fear gauge eased overnight but was on the rise again ahead of Wednesday’s open.

MSCI’s gauge of stocks across the globe surged 2.65% and emerging market stocks rose 4.32%.

The pan-European STOXX 600 index rose 0.96%.

The Dow Jones Industrial Average rose 661.9 points, or 3.2%, to 21,366.81. The S&P 500 gained 35.76 points, or 1.46%, to 2,483.09 and the Nasdaq Composite added 34.47 points, or 0.46%, to 7,452.33.

In the currency markets, the dollar slipped for a third straight session as a scramble for liquidity was soothed by the super-sized U.S. stimulus plan, though it was starting to look a little stronger again.

The dollar index fell 0.216%, with the euro up 0.44% to $1.0834. The Japanese yen weakened 0.24% versus the greenback at 111.51 per dollar.

The risk-sensitive Australian dollar jumped over the 60-U.S. cent mark for the first time in a week.

Bond markets were also calmer. Benchmark U.S. Treasuries were yielding 0.7987% while in Europe Germany’s 10-year yield edged a basis point higher to -0.296%, tailed by other higher-rated government debt.,

European Central Bank chief Christine Lagarde asked euro zone finance ministers during a videoconference on Tuesday to seriously consider a one-off joint debt issue of “coronabonds”, officials told Reuters.

In metals markets, gold changed hands at $1,608.78 an ounce , retaining most of Tuesday’s gains of almost 5%, its biggest jump since 2008.

U.S. crude prices rose slightly, bolstered by progress on a massive pending U.S. economic stimulus package.

Brent crude gained 24 cents to settle at $27.39 a barrel. U.S. crude futures rose 48 cents to settle at $24.49 a barrel.

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Categories
Economy

CEE MARKETS-Stocks jump on U.S. stimulus, but virus crisis not over

    By Anita Komuves
    BUDAPEST, March 25 (Reuters) - Central European stock
markets rose, led by Prague, and regional currencies gained on
Wednesday as the United States agreed on $2 trillion economic
stimulus bill, lifting market sentiment around the world. 
    The stimulus package includes a large increase in
unemployment insurance and hundreds of billions of dollars to
aid companies harmed by the coronavirus.
    "It is too early to open the champagne bottles, the plateau
of the pandemic is well ahead of us," CIB bank said in a note.
"And we will only be able to assess the damage to the real
economy later." 
    Central European governments have also announced a series of
emergency measures recently to counter the economic blow from
lockdowns, production halts and disruption to business activity
and supply chains.
    The Czech, the Polish and the Romanian central banks have
cut their benchmark rates. The National Bank of Hungary left
interest rates unchanged on Tuesday, as expected, and announced
further steps to boost liquidity. It introduced a new fixed-rate
collateralised loan instrument with unlimited liquidity.

    The first tender of the new instrument will be held later on
Wednesday. 
    "This tool will be able to stabilize not only lending, but
also the government securities market ... and this is what we
have seen today," Deputy Governor Marton Nagy said, referring to
a drop in yields, especially at the long end of the yield curve
on Tuesday.
    Five- and 10-year government bond yields dropped in Hungary
by more than 50 basis points on Tuesday before the NBH's
announcements, anticipating the measures, analysts say. 
    Yields on the 10-year Hungarian bonds were up by 20 basis
points on Wednesday, an FI trader in Budapest said. 
    "The market is disappointed because what the NBH announced
is not proper QE, contrary to what is happening in neighboring
countries," he said.
    The Hungarian forint gained 0.57% on Wednesday and
was trading at 352.50 to the euro after slipping the day before
as a reaction to the NBH's measures.
    Elsewhere, the Czech crown was also up, gaining
0.5% and trading at 27.557 to the euro. The zloty
gained 0.66% and was trading at 4.576. The Romanian leu
 was stable. 
    The Czech Republic holds a bond auction on Wednesday with
results due after 1100GMT.
    "Today's bonds auction will be a first test of where demand
currently is," Komercni Banka trader Dalimil Vyskovsky said in a
note. 
    "The finance ministry is offering a set of three bonds ...
as the issuer seems to be trying to offer investors a wider
range of instruments to test where demand will be strongest."
    Czech bond yields were dipping on Wednesday after a drop
yesterday, correcting from a spike in the past few days.
    Regional stock indexes were up, with Prague's equities
jumping more than 7% by 0857 GMT. Budapest and Bucharest
 were up by 3% and Warsaw's stocks gained nearly
3%.          

            CEE        SNAPSHOT    AT                         
            MARKETS               0957 CET            
                       CURRENCIE                              
                       S                              
                       Latest     Previous  Daily     Change
                       bid        close     change    in 2020
 Czech                   27.5570   27.6950    +0.50%    -7.71%
 crown                                                
 Hungary                352.5000  354.5000    +0.57%    -6.06%
 forint                                               
 Polish                   4.5761    4.6065    +0.66%    -6.99%
 zloty                                                
 Romanian                 4.8390    4.8445    +0.11%    -1.05%
 leu                                                  
 Croatian                 7.6090    7.6115    +0.03%    -2.15%
 kuna                                                 
 Serbian                117.4900  117.5450    +0.05%    +0.07%
 dinar                                                
 Note:      calculated from                 1800 CET          
 daily                                                
 change                                               
                                                              
                       Latest     Previous  Daily     Change
                                  close     change    in 2020
 Prague                   851.78  794.7400    +7.18%   -23.65%
 Budapest               33758.50  32614.56    +3.51%   -26.74%
 Warsaw                  1494.06   1451.02    +2.97%   -30.51%
 Bucharest               7719.84   7472.17    +3.31%   -22.63%
 Ljubljana                739.98    706.27    +4.77%   -20.08%
 Zagreb                  1437.84   1403.99    +2.41%   -28.73%
 Belgrade   <.BELEX15     623.04    616.31    +1.09%   -22.28%
            >                                         
 Sofia                    432.07    418.88    +3.15%   -23.95%
                                                              
                       Yield      Yield     Spread    Daily
                       (bid)      change    vs Bund   change
                                                      in
 Czech                                                spread
 Republic                                             
   2-year   <CZ2YT=RR     1.3210    0.0870   +192bps     +5bps
            >                                         
   5-year   <CZ5YT=RR     1.5120    0.0700   +199bps     +4bps
            >                                         
   10-year  <CZ10YT=R     1.5530   -0.0010   +185bps     -3bps
            R>                                        
 Poland                                                       
   2-year   <PL2YT=RR     0.9650    0.0320   +157bps     +0bps
            >                                         
   5-year   <PL5YT=RR     1.4220    0.0820   +190bps     +5bps
            >                                         
   10-year  <PL10YT=R     1.9420    0.1450   +224bps    +12bps
            R>                                        
            FORWARD                                           
                       3x6        6x9       9x12      3M
                                                      interban
                                                      k
 Czech Rep          <       0.69      0.40      0.35      1.76
            PRIBOR=>                                  
 Hungary            <       0.45      0.42      0.33      0.55
            BUBOR=>                                   
 Poland             <       0.55      0.42      0.44      1.17
            WIBOR=>                                   
 Note: FRA  are for ask prices                                
 quotes                                               
 ***************************************************          
 ***********                                          
 

 (Additional reporting by Jason Hovet in Prague and Alan
Charlish in Warsaw; editing by Larry King)
  
 
 

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Categories
Business

Asian shares track Wall Street surge as U.S. stimulus hopes grow

TOKYO (Reuters) – Asian shares extended their rally on Wednesday in the wake of Wall Street’s big gains as U.S. Congress appeared closer to passing a $2 trillion stimulus package to curb the coronavirus pandemic’s economic toll.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose 1.3% with Australian shares rising 4.5% and South Korean shares .KS11 gaining 4.0%. Japan’s Nikkei .N225 added 2.0%.

“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.

On Tuesday, MSCI’s gauge of stocks across the globe .MIWD00000PUS gained 8.39%, 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 .DJI soared 11.37%, its biggest one-day percentage gain since 1933.

U.S. stock futures EScv1 were down 0.5% in early Asian trade.

Senior Democrats and Republicans in the divided U.S. Congress said on Tuesday they were close to a deal on a $2 trillion stimulus package to limit the coronavirus pandemic’s economic toll. But it was unclear when they would be ready to vote on a bill.

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

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

The euro traded at $1.0798 EUR= after four straight days of gains.

The dollar stayed firmer against the yen due to dollar demands at the March 31 end of the Japanese financial, trading at 111.33 yen JPY=, near a one-month high of 111.715 touched the previous day.

Gold soared almost 5%, its biggest gains since 2008, on Tuesday and last stood at $1,633 XAU=, in part helped by concerns lockdowns in major producer South Africa could disrupt supply.

Still, the course of the market is still largely dependent on how much countries can slow the pandemic and how quickly they can lift various curbs on economic activity.

Confirmed cases are now topping 400,000 globally with New York City suffering another quick and brutal rise in the number of infections to around 15,000.

Oil prices steadied as hopes for U.S. stimulus offset fears from 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 epidemic.

U.S crude futures CLc1 rose 1.8% to $24.45 per barrel.

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Economy

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

* 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. 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 $1.0754 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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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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Business

Asia shares rally after rout; U.S., European futures higher

SYDNEY (Reuters) – Asian shares made a partial comeback from a global rout on Friday but still nursed massive losses for the week, while bonds rallied and oil extended its gains.

European shares were set for similar gains. Early in the European day, pan-region Euro Stoxx 50 futures were up 1.87%, German DAX futures gained 1.86% and FTSE futures.

U.S. S&P 500 e-mini stock futures also pointed to a brighter end to the week, adding 1.7%.

In afternoon trade in Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan was 4.41% higher, ending a seven-sessions streak of losses.

But in an indication of the deep damage inflicted on global equities from pandemic fears, the index remains set to finish more than 10% lower this week. It lost 11.1% last week.

As the spread of the coronavirus brought much of the world to a halt, nations have poured ever-more-massive amounts of stimulus into their economies while central banks have flooded markets with cheap dollars to ease funding strains.

The U.S. Senate was debating a $1 trillion-plus package that would include direct financial help for Americans, relief for small businesses and steps to stabilize the economy.

Sources told Reuters that China was set to unleash trillions of yuan of fiscal stimulus to revive an economy facing its first contraction in four decades, though on Friday the country surprised markets by keeping its lending benchmark unchanged.

“The speed and aggression with which authorities are wheeling out measures to cushion the economic fallout from the virus and sowing the seeds for a hopefully rapid recovery, has resonated somewhat in equity markets,” said Ray Attrill, head of FX strategy at NAB.

“Yet there is little doubt that funds need to buy dollars to rebalance hedges in light of the 30% fall in equity markets so far this month,” he added. “The dollar remains the pre-eminent safe-haven asset during times of extreme market stress.”

The dollar’s surge is a nightmare for the many countries and companies that have borrowed heavily in the dollar, leading to yet more selling of emerging market currencies in a negative feedback loop.

Such was the stress that dealers hear whispers of a new Plaza Accord, the 1985 agreement when major central banks used mass intervention to restrain a rampant dollar.

For now, investors in Asia were merely happy Wall Street had not plunged again and 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 to a cash close of 16,552.

OIL RELIEF

Aiding sentiment was a 25% rally in oil prices overnight. U.S. crude was 3.25% higher at $26.04 a barrel on Friday, up from a low of $20.09, while Brent crude stood at $29.14. [O/R]

This was a major relief as the collapse of crude prices had blown a huge hole in the budgets of many oil producers and forced them to dump any liquid asset to raise cash, with U.S. Treasuries a particular casualty.

That was one reason yields on U.S. 10-year Treasuries had climbed over 100 basis points in just nine sessions to reach 1.279%, before steadying a little at 1.1533%.

At the same time, funds across the world were fleeing to the liquidity of U.S. dollars, lifting it to peaks last seen in January 2017 against a basket of its peers.

“Such price action suggests significant market stress, particularly on the wide range of entities outside the U.S. that have borrowed in dollars,” said Richard Franulovich, head of FX strategy at Westpac.

“It could last until global capital flows and investor risk appetite normalizes, possibly months away.”

The euro rose 0.65% to $1.0759 but was not far off three-year lows, having shed more than 3% for the week so far – the steepest decline since mid-2015. The dollar did ease back to 109.88 yen, but was still up nearly 1.9% on the week.

Sterling continued its wild swings with a rally to $1.1677, having earlier hit its lowest since 1985 around $1.1404. It was still down nearly 5% for the week.

The jump in the dollar has made gold more expensive in other currencies. While it rallied on Friday to $1,494.48 per ounce, it remains down about 2.5% on the week. [GOL/]

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Categories
Business

Asia shares bounce after rout, rush for dollars causing stress

SYDNEY (Reuters) – Asian shares staged a rare rally on Friday as Wall Street eked out gains, bonds rallied and oil boasted its biggest bounce on record, though the panicked rush into U.S. dollars suggested the crisis was far from done.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 3.2%, after seven sessions of losses.

As the spread of the coronavirus brought much of the world to a halt, nations have poured ever-more-massive amounts of stimulus into their economies while central banks have flooded markets with cheap dollars to ease funding strains.

The U.S. Senate was debating a $1 trillion-plus package that would include direct financial help for Americans, relief for small businesses and steps to stabilize the economy.

Sources told Reuters that China was set to unleash trillions of yuan of fiscal stimulus to revive an economy facing its first contraction in four decades.

“The speed and aggression with which authorities are wheeling out measures to cushion the economic fallout from the virus and sowing the seeds for a hopefully rapid recovery, has resonated somewhat in equity markets,” said Ray Attrill, head of FX strategy at NAB.

“Yet there is little doubt that funds need to buy dollars to rebalance hedges in light of the 30% fall in equity markets so far this month,” he added. “The dollar remains the pre-eminent safe-haven asset during times of extreme market stress.”

The dollar’s surge is a nightmare for the many countries and companies that have borrowed heavily in the dollar, leading to yet more selling of emerging market currencies in a negative feedback loop.

Such was the stress that dealers hear whispers of a new Plaza Accord, the 1985 agreement when major central banks used mass intervention to restrain a rampant dollar.

For now, investors in Asia were merely happy Wall Street had not plunged again and South Korean shares bounced 3.5%, though that still left them down 14% for the week.

Australia’s beleaguered market gained 4.2%, and futures for Japan’s Nikkei were trading up at 17,435, compared to a cash close of 16,552.

E-Mini futures for the S&P 500 eased 1.2%, perhaps unsettled by news California’ governor had issued a statewide “stay at home” order to residents.

OIL RELIEF

Aiding sentiment was a 25% rally in oil prices overnight. U.S. crude added another 26 cents to $26.17 a barrel on Friday, up from a low of $20.09, while Brent crude stood at $28.25.

This was a major relief as the collapse of crude prices had blown a huge hole in the budgets of many oil producers and forced them to dump any liquid asset to raise cash, with U.S. Treasuries a particular casualty.

That was one reason yields on U.S. 10-year Treasuries had climbed over 100 basis points in just nine sessions to reach 1.279%, before steadying a little at 1.15%.

At the same time, funds across the world were fleeing to the liquidity of U.S. dollars, lifting it to peaks last seen in January 2017 against a basket of its peers.

“Such price action suggests significant market stress, particularly on the wide range of entities outside the U.S. that have borrowed in dollars,” said Richard Franulovich, head of FX

strategy at Westpac.

“It could last until global capital flows and investor risk appetite normalizes, possibly months away.”

The euro was not far from three-year lows at $1.0731, having shed 3.3% for the week so far – the steepest decline since mid-2015. The dollar did ease back a touch to 110.22 yen, but was still up 2.1% on the week.

Sterling continued its wild swings with a rally to $1.1646, having earlier hit its lowest since 1985 around $1.1404. It was still down a hefty 5.2% for the week.

The jump in the dollar has made gold more expensive in other currencies and pushed its price down 3% for the week to $1,482.70 per ounce.

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Categories
Economy

GLOBAL MARKETS-Stock markets extend gains as policymakers pull out all the stops

* Wall Street gains as policymakers pulled out all the stops

* Dollar surges to highest since January 2017

* ECB launches 750 billion-euro asset purchase program

* Euro STOXX 600 rises in volatile trade

* Asian stock markets : tmsnrt.rs/2zpUAr4

* Graphic: World FX rates in 2020 tmsnrt.rs/2egbfVh

By Chris Prentice and Tom Wilson

WASHINGTON/LONDON, March 19 (Reuters) – European and U.S. stocks extended gains on Thursday after initially dropping, in a sign of tentatively more stable markets, as the Federal Reserve and other central banks across the world moved to stem a coronavirus-induced financial rout.

The most recent move by the Fed to boost liquidity in tight markets, especially trading for Treasury securities, helped calm jittery investors and lift the dollar to a fresh three-year high against a basket of major currencies.

The Fed increased the access to dollars for central banks in nine countries so contracts in key commodities and other goods that are made in the U.S. currency can be done, helping to loosen particularly tight bond markets.

The U.S. central bank said the swaps, in which the Fed accepts other currencies as collateral in exchange for dollars, will be in place for at least the next six months.

The swaps will allow the central banks of Australia, Brazil, South Korea, Mexico, Singapore, Sweden, Denmark, Norway and New Zealand to tap a combined total of up to $450 billion to help ensure the world’s dollar-dependent financial system functions.

The collateral to purchase crude oil, for example, is U.S. Treasury debt and to buy those securities requires dollars, said Michael Skordeles, U.S. macro strategist at Truist/Suntrust Advisory Services in Atlanta.

“All these things kind of happening at once causes a lot of dominoes to fall, and as the dominoes fall, it creates more demand, pushing people toward the dollar,” Skordeles said.

“This (the dollar swap lines) is going to help, but it’s not a silver bullet,” he said. “Because there’s a flow of capital into dollar-denominated assets, in particular U.S. Treasuries, it’s starving these countries of liquidity and making the dollar appreciate.”

U.S. oil prices surged about 25%, recouping some losses from a sell-off that drove prices to near 20-year lows over the past month, but analysts saw the rebound as a brief reprieve from the economic tsunami the virus is expected to cause.

On Wall Street, the benchmark S&P 500 climbed 52.23 points, or 2.18%, to 2,450.33 and the Nasdaq Composite surged 286.48 points, or 4.1%, to 7,276.32.

The Dow Jones Industrial Average rose 254.89 points, or 1.28%, to 20,153.81. As of the prior session, nearly all of the Dow’s gains since President Donald Trump’s 2017 inauguration had been wiped out as the widening repercussions of the coronavirus pandemic threatened to cripple economic activity.

The meltdown had pushed Wall Street’s three main indexes down about 30% as of Wednesday from their record closing highs last month.

The pan-European STOXX 600 index rose 2.91% and MSCI’s gauge of stocks across the globe gained 0.67%.

TREASURY YIELDS FALL IN VOLATILE TRADE

Global bond prices gyrated with desperate investors dumping government bonds and hoarding cash in markets gripped by pandemic fears that have forced central banks to step up support for debt.

U.S. Treasury yields largely fell in volatile trading, a sign the Fed’s efforts were working.

The dollar continued its rally as investors rushed to secure liquidity. The British pound was down in choppy trade and slipped past the previous day’s trough to the lowest since 1985.

Bond markets stabilized somewhat after the European Central Bank pledged late Wednesday to buy 750 billion euros ($820 billion) in sovereign debt through 2020. That brought the ECB’s planned purchases for this year to 1.1 trillion euro.

Government bond yields in Italy and across the euro zone dropped after the ECB’s emergency measures, though European stocks fell back into negative territory after arresting their rout in early trading.

Expected price swings for some of the world’s biggest currencies rocketed to multi-year highs as the demand for dollars forced traders to dump currencies across the board.

For the British pound versus the dollar, expected volatility gauges leapt to 24.4%, their highest level since before the 2016 Brexit vote.

“One unresolved and really critical issue is what’s going on in volatility,” said Andrew Sheets, chief cross-asset strategist at Morgan Stanley. “I think that volatility needs to stabilise before the broader market can heal.”

Italy, which has seen its borrowing costs jump in recent days, led the drop in yields after the ECB move.

The gap over the safer German Bund’s yields tightened.

The U.S. Fed earlier promised a liquidity facility for money market mutual funds, and Australia’s central bank slashed interest rates to a record low of 0.25%.

Traders reported huge strains in bond markets, however, as distressed funds sold any liquid asset to cover equity losses and investor redemptions.

Benchmark 10-year sovereign bond yields in New Zealand, Malaysia, Korea, Singapore and Thailand surged as prices fell, and U.S. 10 year Treasuries rose 10 basis points through the session.

The coronavirus pandemic has killed almost 9,000 people globally, infected more than 218,000 and prompted widespread emergency lockdowns.

Gold dropped 1.1% and like other assets was buffeted by volatility. Copper, a gauge of global economic health, hit its down-limit in Shanghai, and London futures traded in London fell to their lowest since 2016. For Reuters Live Markets blog on European and UK stock markets, please click on:

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