Asia shares suffer fresh spill as coronavirus damage deepens; STI closes down 4.5%

Japan's Nikkei sank 3.2 per cent.
Japan's Nikkei sank 3.2 per cent.PHOTO: AFP

SYDNEY (REUTERS) - Asian shares  slid on Monday (March 30) as fears mounted that the global coronavirus shutdown could last for months although markets regained some lost ground late in the session with Australia posting a standout jump.

European stock markets also headed lower in early trading on Monday, as fears about the economic hit from the pandemic intensified with several nations extending near-total lockdowns.

Australia's benchmark ASX200 saw a late surge, closing up 7 per cent after Prime Minister Scott Morrison unveiled a A$130 billion (S$113.75 billion) package to help save jobs.

Most other markets closed lower but trimmed earlier losses. Japan's Nikkei dropped 1.6 per cent, Shanghai blue chips fell 0.9 per cent, and there were sharper drops in South-east Asia.

Singapore's Straits Times Index closed down 4.5 per cent. Prime Minister Lee Hsien Loong said in an interview with CNN on Sunday that the world must brace itself for a long battle ahead as the coronavirus outbreak could take years to run its course.  Also, Singapore's central bank on Monday eased its monetary policy as widely expected, as the economy braces for a deep recession.

South Korea's Kospi index closed was flat while Hong Kong's Hang Seng dropped 1.3 per cent. 

"Markets in Asia are reacting to concerns about the knock-on economic impact of the coronavirus situation in Europe and North America, rather than Asian case numbers," said Suresh Tantia senior investment strategist at Credit Suisse.

JPMorgan now predicts that global GDP could contract at a 10.5 per cent annualised rate in the first half of the year.

"We continue to mark down 1H20 global GDP forecasts as our assessment of both the global pandemic's reach and the damage related to necessary containment policies has increased," said JPMorgan economist Bruce Kasman.

As a result, central banks have mounted an all-out effort to bolster activity with rate cuts and massive asset-buying campaigns, which have at least eased liquidity strains in markets.

China on Monday became the latest to add stimulus with a cut of 20 basis points in a key repo rate, the largest in nearly five years.

Singapore also eased as the city-state’s bellwether economy braced for a deep recession, while New Zealand’s central bank said it would take corporate debt as collateral for loans.

Rodrigo Catril, a senior FX strategist at NAB, said the main question for markets was whether all the stimulus would be enough to help the global economy withstand the shock.

 
 

"To answer this question, one needs to know the magnitude of the containment measures and for how long they will be implemented," he added. "This is the big unknown and it suggests markets are likely to remain volatile until this uncertainty is resolved."

It was not encouraging, then, that British authorities were warning lockdown measures could last months.

While President Donald Trump had talked about reopening the US economy for Easter, on Sunday he extended guidelines for social restrictions to April 30.

Japan on Monday expanded its entry ban to include citizens travelling from the United States, China, South Korea and most of Europe.

DOLLAR NOT DONE YET

Bond investors looked to be bracing for a long haul with yields at the very short end of the Treasury curve turning negative and those on 10-year notes dropping a steep 26 basis points last week to last stand at 0.66 per cent.

That drop has combined with efforts by the Federal Reserve to pump more US dollars into markets, and dragged the currency off recent highs.

Indeed, the dollar suffered its biggest weekly decline in more than a decade last week.

 
 

Against the yen, the dollar was pinned at 107.53, well off the recent high at 111.71. The euro edged back to US$1.1088, after rallying more than 4 per cent last week.

"Ultimately, we expect the USD will soon reassert itself as one of the strongest currencies," argued analysts at CBA, noting the dollar's role as the world's reserve currency made it a countercyclical hedge for investors.

"This means the dollar can rise because of the deteriorating global economic outlook, irrespective of the high likelihood the US is also in recession."

The dollar’s retreat had provided a fillip for gold, but fresh selling emerged on Monday as investors were forced to liquidate profitable positions to cover losses elsewhere. The metal was last off 0.3 per cent at US$1,611.42 an ounce.

Oil prices were again under water as Saudi Arabia and Russia showed no signs of backing down in their price war even as global transport restrictions hammer demand.

Brent crude futures lost US$1.46 to US$23.47 a barrel, while US crude fell 97 cents to US$20.54.

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