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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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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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World News

Spain reports 6,600 new coronavirus cases overnight, over 500 dead

MADRID (Reuters) – The number of new coronavirus cases in Spain jumped on Tuesday to 39,673 from 33,089 cases registered on Monday, the health ministry reported on Tuesday.

The number of fatalities rose to 2,696 overnight from 2,182, the ministry said.

Related Coverage

  • Health workers make up nearly 14% of Spain's coronavirus cases

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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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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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World News

Spain's coronavirus death toll climbs by over 200 overnight

MADRID (Reuters) – Spain’s health ministry said on Thursday the death toll from the coronavirus epidemic soared by 209 to 767 fatalities from the previous day as the total number of coronavirus cases climbed by a quarter to 17,147 on Thursday.

On Wednesday, there were 13,716 cases in Spain.

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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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Stocks, oil sliding again in 'irrevocably changed' markets

LONDON/TOKYO (Reuters) – Global stocks stumbled back into the red on Wednesday with Wall Street futures pointing to more losses ahead as fears over the coronavirus fallout eclipsed large-scale support measures rolled out by policymakers around the globe.

Some traditional safe-haven assets such as gold were also under pressure as battered investors looked to unwind their damaged positions.

Oil prices fell for a third session with U.S. crude futures tumbling to a 17-year low.

“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.”

European equity markets suffered hefty losses with London and Frankfurt down 3.5% in early trade while Paris and Milan slipped around 3%.

The falls in Europe followed losses in Asia where MSCI’s broadest index of Asia-Pacific shares outside Japan dropped 3.8% to lows last seen in summer 2016, led by a 6.4% fall in Australia. Japan’s Nikkei erased early gains to dip 1.7%. MSCI’s global stocks index dropped 1%.

Losses were set to extend to Wall Street with U.S. stock futures indicating as much as 4% lower and hitting their daily low limit just a day after the S&P 500 rose 6% and Dow Jones rose 5.2% or 1,049 points. [.N]

“A rise of 1,000 points in Dow is something you see only during a financial crisis. It is not a good sign,” said Tomoaki Shishido, senior fixed income strategist at Nomura Securities.

“A rise of 100 points would be much better for the economy.”

Big price swings have left market participants nursing losses, making them reluctant to jump back into the market and thereby reducing trading volume.

Tuesday’s Wall Street gains came as policymakers cobbled together packages to counter the impact of the virus.

The Trump administration unveiled 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 pounds ($400 billion) rescue package for businesses threatened with collapse while France, which went into lockdown on Tuesday, is to pump 45 billion euros ($50 billion) of crisis measures 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 U.S. Federal Reserve step in again to ease funding stress among corporates by reopening its Commercial Paper Funding Facility to underwrite short-term corporate loans.

“While markets react to positive news on stimulus, that doesn’t last long. I think there are a lot of banks and investors whose balance sheet was badly hit and they still have lots of positions to sell,” said Shin-ichiro Kadota, senior currency and rates strategist at Barclays.

CORONA BONDS

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.

That lifted high-grade euro zone government bonds yield, led by Germany, where yields rose nine basis points to the highest level in over a month at -0.342%. [GVD/EU]

Italian government bonds gained some respite after several sessions of relentless selling, with yields falling between two and six basis points across the curve.

Benchmark U.S. 10-year Treasury yield edged up to a fresh three week high of 1.2080 after the Fed move eased some market jitters, while U.S. 30-year bond yields climbed as high as 1.8380%.

In currency markets, the safe-haven yen gained sharply while the dollar held onto hefty overnight gains against other currencies. [FRX/]

The dollar slipped 0.1% against the yen to 107.53 yen while the euro stood at $1.0971. The dollar index against a basket of currencies stood at 99.699, up 0.12% on the day.

Oil prices fell as the outlook for fuel demand darkened with travel and social lockdowns triggered by the coronavirus epidemic.

U.S. crude was down 84 cents, or 3.12%, at $26.11 a barrel by 0822 GMT, having earlier fallen to $25.83 a barrel, the lowest since May 2003. [O/R]

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Global stocks drop as investors shun risk on coronavirus fears

TOKYO (Reuters) – U.S. stock futures and several Asian shares fell in choppy trade on Wednesday, as worries about the coronavirus pandemic eclipsed hopes broad policy support would combat the economic fallout of the outbreak.

Most traditional safe-haven assets were also under pressure as battered investors looked to unwind their damaged positions, leading to wide discrepancies between various markets.

In Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan dipped 0.3%, led by a 4.9% fall in Australia while Japan’s Nikkei gained 1.6%.

U.S. stock futures fell 3% in Asia, a day after the S&P 500 rose 6% and Dow Jones rose 5.2% or 1,049 points.

“A rise of 1,000 points in Dow is something you see only during a financial crisis. It is not a good sign,” said Tomoaki Shishido, senior fixed income strategist at Nomura Securities.

“A rise of 100 points would much better for the economy.”

Wild swings in markets imply the capacity of various players, from speculators to brokerages, to absorb risks has been tormented, analysts say.

The increase in the S&P 500 futures the previous day, still down more than 10% so far this week, came as policymakers cobbled together packages to counter the impact of the virus.

The Trump administration on Tuesday unveiled a $1 trillion stimulus package that could deliver $1,000 cheques to Americans within two weeks to buttress an economy hit by coronavirus while many other governments look to fiscal stimulus.

“That would be bigger than a $787 billion package the Obama administration came up with after the Lehman crisis, so in terms of size it is quite big,” said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management.

“Yet stock markets will likely remain capped by worries about the spreading coronavirus,” he said.

Britain unveiled a 330 billion pounds ($400 billion) rescue package for businesses threatened with collapse while France is to pump 45 billion euros ($50 billion) of crisis measures 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.

The U.S. Federal Reserve stepped in again on Tuesday to ease funding stress among corporates by reopening its Commercial Paper Funding Facility to underwrite short-term corporate loans.

“While markets react to positive news on stimulus, that doesn’t last long. I think there are a lot of banks and investors whose balance sheet was badly hit and they still have lots of positions to sell,” said Shin-ichiro Kadota, senior currency and rates strategist at Barclays.

BOND AND CURRENCIES

The damage to markets was apparent in bond markets as well.

U.S. Treasuries extended their losses, driving the benchmark 10-year yield to 1.009%. It hit a two-week high of 1.105% in the previous day, rising more than 30 basis points.

“The staggering thing is, bonds have fallen even as the Fed has been buying 40 billion dollars of bonds every day. That far outpaces the Fed’s previous episodes of quantitative easing and shows just how much selling pressure there is now,” said Nomura’s Shishido.

Some market players said talk of big stimulus is raising concerns about the long-term outlook of U.S. fiscal health, putting pressure on long-term U.S. government bonds.

The spread between 30-year and five-year yields rose to almost 1%, the highest since September 2017.

The U.S. 30-year bonds yield jumped 38 basis points on Tuesday to 1.648%.

In the currency market, a shortage of dollar cash supported the U.S. currency.

The Australian dollar bounced back to $0.6008 after having hit a 17-year low of low of $0.5958 the previous day.

The kiwi recovered to $0.5955 after hitting a 11-year trough of $0.5919. [FRX/]

The dollar held firm against most currencies but dipped 0.25% against the safe-haven yen to 107.28 yen.

The euro was steady at $1.1004.

U.S. benchmark oil futures sank to near their 2016 trough of around $26 per barrel on prospects of slow demand and a Saudi-instigated price war.

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