Stocks, oil sliding again in 'irrevocably changed' markets
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[March 18, 2020]
By Karin Strohecker and Hideyuki Sano
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.
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A passerby wearing a protective face mask, following an outbreak of
the coronavirus, walks past an electronic board showing the graphs
of the recent movements of Japan's Nikkei share average outside a
brokerage in Tokyo, Japan March 6, 2020. REUTERS/Issei Kato
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]
(Reporting by Karin Strohecker in London and Hideyuki Sano in Tokyo;
Editing by Toby Chopra)
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