Asian stocks slide, US dollar soars as ECB fails to stop panic; STI closes down 4.7%

Passers-by wearing protective face masks reflected on a screen displaying Nasdaq movements outside a brokerage in Tokyo on March 17, 2020. PHOTO: REUTERS

HONG KONG (AFP) - Asia stocks and bonds plunged on Thursday (March 19) while the US dollar soared as the European Central Bank's (ECB) latest promise of stimulus provided only brief solace while the world struggles to contain the coronavirus pandemic.

The Australian dollar was crushed, falling 3.3 per cent to a more than 17-year low, and Asian markets gave up initial gains made after the ECB announced a massive €750 billion (S$1.18 trillion) bond-buying programme.

Asian markets initially climbed on the news but soon went into a tailspin as investors contemplate months of economic hardship, with countries around the world in lockdown to prevent the spread of Covid-19, which has now infected more than 200,000 people and killed almost 9,000.

Singapore's Straits Times Index closed down 4.7 per cent, Seoul collapsed 8.4 per cent while Sydney dropped 3.4 per cent.

Tokyo and Shanghai ended down 1 per cent, while Hong Kong fell 2.6 per cent.

Manila plunged almost 25 per cent after reopening following a two-day suspension prompted by the outbreak but it later bounced back toclose 1.3 per cent lower.

The sharp losses came in tandem with a rally in the US dollar as investors scrambled for cash to pay debts or just stash away.

The dollar gained against the British pound to its highest since 1985, last up 0.8 per cent at US $1.1535, as investors rushed to secure liquidity.

The greenback was also up more than 6 per cent against the Australian dollar and more than 3 per cent on the South Korean won.

Against a basket of six major currencies the dollar gained 0.6 per cent, near a more-than-three-year high touched a day earlier.


And AxiCorp's Stephen Innes warned of further turmoil despite the historic moves by banks and governments.

"Wartime economics is not going to help with everyone in lockdown sitting at home watching Netflix," he said.

The ECB's bazooka was the latest in a string of measures by central banks and governments aimed at supporting the global economy, which have amounted to almost US$2 trillion (S$2.9 trillion).

Still, the measures have not been enough to soothe panic-stricken investors and analysts say more must be done. Soon after the ECB announcement, French President Emmanuel Macron called for more fiscal action from leaders.

"It is up to us European states to be ready through budgetary interventions and greater financial solidarity within the euro zone," he tweeted.

Australia's central bank became the latest to move, slashing interest rates to a record low on Thursday.

The latest rout in Asia followed another day of carnage on Wall Street, where the Dow ended down more than 6 per cent and below 20,000 for the first time since 2017 as traders feared that the spiralling pandemic could tip the world into a severe and long-lasting recession.

The ECB move also had a dramatic effect on the oil market, with the price of the US benchmark West Texas Intermediate up almost 17 per cent at nearly US$24 a barrel, recouping much of the 24 per cent lost the day before.

However, the commodity tracked the sell-off on other markets and lost a large chunk of those gains.

Oil markets have been hammered by collapsing demand as the virus prompted sweeping travel restrictions and business closures, and as major producers Saudi Arabia and Russia engage in a price war.

"There is just extreme volatility in the market now as participants try to assess the economic impact of the coronavirus and what it means for oil demand," Mr Daniel Hynes, at Australia & New Zealand Banking Group, said.

"The high level of uncertainty around the hit to demand means that markets are going to continue to test these levels and invite some sort of reaction from producers."

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