Asia markets extend rebound on hopes of global central bank action; STI up 1%
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People wearing protective masks walk past a panel displaying the Hang Seng Index in Hong Kong on March 2, 2020.
PHOTO: REUTERS
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TOKYO (REUTERS) - Global shares and oil prices extended their rebound on Tuesday (March 3) on mounting speculation policymakers around the world would move to ease the economic fallout from the spreading coronavirus.
The European Central Bank on Monday joined the chorus of central banks signalling a readiness to deal with the growing threats from the outbreak.
Earlier messages from the US Federal Reserve that it was prepared to act weighed on the US dollar against a basket of currencies.
The improved confidence supported US S&P 500 futures, which rose 0.5 per cent in early Asian trade on Tuesday, a day after the S&P 500 rallied 4.6 per cent, the biggest gain since December 2018.
Japan's Nikkei jumped 1.6 per cent while MSCI's broadest index of Asia-Pacific shares outside Japan gained 0.8 per cent.
South Korea's Kospi added 2.4 per cent and Australian shares advanced 1.8 per cent ahead of an expected rate cut by the Reserve Bank of Australia.
Singapore's Straits Times Index surged at the open, gaining 31.27 points or 1 per cent to 3,038.99 as of 9:06am.
The rout in global stocks last week had already prompted Fed Chair Jerome Powell and Bank of Japan Governor Haruhiko Kuroda to flag a readiness to move.
Money market pricing shows traders now expect a 100 per cent chance of a 0.25 percentage point cut to the current 1.50 per cent-1.75 per cent target rate at the Fed's March 17-18 meeting as well as a 0.10 percentage point cut to the ECB's key rate at March 12 meeting.
G7 finance ministers are also expected to hold a conference call on Tuesday (1200 GMT), sources said, to discuss measures to deal with the economic impact of the coronavirus outbreak.
"There are hopes that G7 countries will take some sort of coordinated actions to fight the virus, possibly including fiscal spending," said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui DS Asset Management.
The frantic moves by policymakers reflected growing fears that the disruption to supply chains, factory output and global travel caused by the new epidemic could deal a serious blow to a world economy trying to recover from the US-China trade war.
Coronavirus is now spreading much more rapidly outside China than within the country, leading the world into uncharted territory, although the World Health Organization (WHO) has so far stopped short of calling it a pandemic.
In the United States, six people in the Seattle area have died of the illness caused by the new coronavirus, as authorities across the country scrambled to prepare for more infections.
RISK RETURNS
The rebound in global stock prices saw US bond yields roll back some of their sharp falls.
The 10-year US Treasuries yield retreated to 1.155 per cent from a record low of 1.030 per cent marked on Monday. The rate-sensitive two-year notes yield jumped back to 0.903 per cent from Monday's 3 1/2-year low of 0.710 per cent.
Still, the 10-year and two-year yields are down about 40 and 50 basis points, respectively, from about two weeks ago.
April Fed funds rate futures still price in about 80 per cent chance of a 0.50 percentage point cut.
Expectations of Fed rate cuts prompted investors to cut their exposure to the dollar.
Against the yen, the dollar traded at 108.31 yen, off a five-month low of 107 set on Monday.
The euro stood at US$1.1139, having hit an eight-week peak of US$1.1185.
The Australian dollar fetched US$0.6533, about a cent above an 11-year low of US$0.64345 set on Friday. Australia's central bank is widely expected to cut the policy interest rate to 0.5 per cent from 0.75 per cent, already at a record low.
Oil prices bounced back further after a jump of more than 4 per cent on Monday, reversing an early decline to multi-year lows.
Hopes of a deeper output cut by the Organization of the Petroleum Exporting Countries and central banks' policy measures countered fears of slower growth.
US West Texas Intermediate (WTI) crude futures rose 2.7 per cent to US$48.01 a barrel, up sharply from Monday's low of US$43.32 a barrel, which was the lowest since December 2018.
While the coronavirus continues to dominate investor attention, focus has also swung to Super Tuesday in the United States, the biggest day in the Democratic primary elections to choose a challenger to President Donald Trump.
