Asia stocks mostly rise after US rally on bets of more stimulus: STI up 1.5%

Pedestrians wearing masks walk before a stock market indicator board in Tokyo, Japan, on March 25, 2020.
Pedestrians wearing masks walk before a stock market indicator board in Tokyo, Japan, on March 25, 2020.PHOTO: EPA-EFE

TOKYO (REUTERS, BLOOMBERG) - Asian stocks mostly rose on Friday (March 27) as investors wagered policymakers will roll out more stimulus measures to combat the coronavirus pandemic after US unemployment filings surged to a record.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.8 per cent. Australian shares gave up gains to fall 5.3 per cent after a strong week, but Japan’s Nikkei rose 1.9 per cent. South Korea was flat but benchmarks rose 0.6 per cent in Hong Kong and 0.8 per cent in China.

Singapore shares pared the morning’s heftier gains with the Straits Times Index up 1.5 per cent at 1:43pm local time. The government on Thursday announced a further $48.4 billion in measures to support the economy.

Pan-regional Euro Stoxx 50 futures were down 1.41 per cent, German DAX futures fell 1.38 per cent, and FTSE futures were down 2.21 per cent, suggesting gains in Asian shares will not carry over into Europe.

E-Mini futures for the S&P 500 reversed course and fell 1.58 per cent in Asia following three consecutive days of gains in the S&P 500 on Wall Street. The Dow Jones Industrial Average  climbed out of its bear market overnight in its biggest 3-day surge since 1931.

The MSCI Asia Pacific index has risen 13 per cent from its March low after losing about a third of its value from a record high in January. Benchmark gauges in the Philippines, South Korea and India have all advanced more than 15 per cent from recent lows, drawing closer to a 20 per cent gain defined as a bull market.

“The 20 per cent yardstick does not matter unless we start seeing higher highs and sustainable buying at lows,” said Jaiganesh Balasubramaniam, a market technician at Cashthechaos.com. “We need higher highs and higher lows on different time frames before we can say that we are out of bear markets.”

Balasubramaniam added that the S&P 500 Index has yet to mark a 20 per cent gain from its recent trough so “investors should not go berserk about attaching bull market titles.”

Meanwhile, some investors have been hunting for bargains after historic drops in the region’s equities. The Asian gauge is set for its fourth straight day of gains amid unprecedented monetary and fiscal stimulus across the globe in a bid to contain the economic damage caused by the coronavirus pandemic.

Volatility, however, remains high, with the 10-day realized measure on the Asian equity benchmark still around the highest since data going back to 2010.

“It’s foolhardy to jump into a volatile market that has only risen for a few days after falling so heavily,” said Dale Gillham, chief analyst at Wealth Within. “It is very dangerous.”

The US dollar fell against major currencies as central banks’ steps to solve a dollar shortage in funding markets started to gain traction.

The US House of Representatives is expected to pass a US$2.2 trillion stimulus package that will flood the world’s largest economy with money to stem the damage caused by the pandemic.

The US Federal Reserve has already slashed rates to zero and launched quantitative easing. The Fed will also take the unprecedented step of offering a direct backstop for corporate loans.

The United States is now the country with the most coronavirus cases, surpassing even China, where the flu-like illness first emerged late last year.

olicymakers may need to offer more stimulus as the virus slams the brakes on economic activity and increases healthcare spending.

“I’m not sure what measures are left, but the reaction in stocks shows some people hoping for more stimulus thought the market was a little oversold,” said Yukio Ishizuki, FX strategist at Daiwa Securities in Tokyo.

“Currencies tell a different story. The dollar is the lead actor. The mad rush to buy dollars due to liquidity concerns is starting to fade.”

 
 

The number of Americans filing claims for unemployment benefits surged to a record of more than 3 million last week as strict measures to contain the virus pandemic ground the country to a sudden halt, data showed on Thursday.

The jobless blowout was announced shortly after Fed Chairman Jerome Powell said the United States “may well be in recession”, an unusual acknowledgement by a Fed chair that the economy may be contracting even before data confirms it.

Global equity markets took the data in their stride, partly as most central banks have already aggressively eased policy and governments are backing this up with big fiscal spending.

Chinese shares, battered this month because of the virus, rose 1.6 per cent on Friday. Shares in South Korea, another country hit hard by the pandemic, rose 0.42 per cent.

Leaders of the Group of 20 major economies pledged on Thursday to inject over US$5 trillion into the global economy to limit job and income losses from the coronavirus.

 
 

CURRENCY MARKET
In the currency market, the greenback fell 1.16 per cent to 108.34 yen in Asia, on pace for a 2.2 per cent weekly decline.

The dollar was also headed for steep weekly declines against the Swiss franc, pound, and euro.

The US currency’s fall after two weeks of gains suggests the Fed’s efforts to relieve a crunch in the dollar funding market are working, some analysts said.

The yield on benchmark 10-year Treasury notes fell in Asia to 0.7979 per cent, while the two-year yield edged up to 0.2829 per cent.

Yields were headed for a weekly decline, taking cues from the Fed’s extraordinary steps to bolster markets and the huge stimulus package.

US crude rose 2.04 per cent to US$23.06 a barrel. Brent crude rose 0.84 per cent to US$26.56 per barrel. Energy markets have been caught in a tug-of-war between hopes for stimulus spending and worries about excess oil supplies.

Gold, normally bought as a safe haven, was slightly lower. Spot gold fell 0.34 per cent to US$1,626.01 per ounce.

Gold market participants remained concerned about a supply squeeze after a sharp divergence between prices in London and New York. The virus has grounded planes used to transport gold and closed precious metal refineries.