Asia stocks seesaw, US futures jump after historic market rout; STI down 1%

Central bank stimulus around the world failed to mollify investors worried about the damage the coronavirus is inflicting on economies. PHOTO: AFP

TOKYO (REUTERS, BLOOMBERG) - The stomach-turning roller coaster ride in global financial markets showed no signs of easing in Asia on Tuesday (March 17) a day after the United States stocks plunged the most since 1987 on fears over the coronavirus pandemic.

Japan's Nikkei stock index was up 1 per cent, paring an over 2 per cent gain earlier. The Bank of Japan on Tuesday offered US$30.27 billion (S$42.98 billion) in its 84-day dollar funding operation, the largest amount since the the global financial crisis.

Australian shares extended gains to 6 per cent, after a massive plunge of almost 10 per cent on Monday. The Reserve Bank of Australia on Tuesday morning pumped A$8.8 billion (S$7.65 billion) into the financial system through regular repurchase agreements, well above its original intention of A$2.06 billion.

South Korea's Kospi was back down again, by 1.5 per cent, after earlier erasing a loss of over 3 per cent.

Hong Kong's Hang Seng index was up 1 per cent while the Shanghai Composite Index was 0.2 per cent higher.

Singapore's Straits Times index, which swung between gains and losses, fell again and was trading down 1 per cent as of 1:20pm.

The Philippine Stock Exchange suspended trade indefinitely on Tuesday, citing the safety of traders and staff in the face of the coronavirus pandemic.

The move, which was announced by the exchange overnight and takes effect on Tuesday, is part of a broader quarantine ordered by Philippines President Rodrigo Duterte to curb the outbreak.

But the shutdown has caught the eye of analysts who raised the prospect of other exchanges following suit.

US stock futures jumped, hitting the 'limit up' after benchmarks dived 12 per cent on Monday. As of 12:55pm Singapore time, Dow Jones Industrial Average futures were 800 points higher. S&P 500 and Nasdaq 100 futures were also higher.

CNBC reported that the moves came after President Donald Trump tweeted: "The United States will be powerfully supporting those industries, like Airlines and others, that are particularly affected by the Chinese Virus. We will be stronger than ever before!"

US airlines formally released a plea on Monday for a bailout of some US$50 billion (S$71 billion). White House officials have highlighted airlines as a major concern and signaled broad support for a federal plan to fortify the industry.

"It's no surprise that we're seeing a bounce (in US stock futures) after the big falls on Monday," said Michael McCarthy, chief market strategist at CMC Markets in Sydney. "However, the situation continues to deteriorate on the economic front because of the virus."

Gold, which is normally bought as a safe-haven, extended declines on Tuesday as some investors chose to sell whatever they could to keep their money in cash.

Oil rebounded on Tuesday as investors bought at bargain levels after prices plunged to four-year lows as governments worldwide ramped up measures to contain the spread of the deadly coronavirus. Analysts said, however, that any recovery in oil prices is likely to be short-lived as travel restrictions and other tough measures rolled out to fight the virus sap demand amid a production glut and price war.

US benchmark West Texas Intermediate (WTI) was trading at US$30 a barrel, up 4.53 per cent, at around 0120 GMT. International benchmark Brent was up 2.96 per cent at US$30.94 after crashing more than 10 per cent overnight to below US$30 a barrel for the first time in four years.

The US Federal Reserve stunned investors with another emergency rate cut on Sunday, prompting other central banks to ease policy in the biggest coordinated response since the global financial crisis more than a decade ago.

Investors, however, are worried that central banks may have spent all their ammunition and that more draconian restrictions on personal movement are necessary to contain the global coronavirus outbreak.

Financial markets cratered on Monday. The S&P 500 tumbled 12 per cent, its biggest drop since "Black Monday" three decades ago, despite the Fed's surprise move late Sunday to cut interest rates to near zero, its second emergency interest rate cut in less than two weeks.

Some US$2.69 trillion in market value was wiped from the S&P 500 as it suffered its third-largest daily percentage decline on record. Over the past 18 days, the benchmark index has lost US $8.28 trillion.

Some investors say markets will not settle unless the US government announces a big fiscal spending package to match the Fed's bold actions to slash rates and keep credit markets functioning.

Others say liquidity in some financial markets is starting to fall because there's such a high degree of uncertainty, meaning even some traditional safe-havens may not be that safe.

"This is different. The thing that is scarier about it is you've never been in a scenario where you shut down the entire economy," said Mr Steve Chiavarone, a portfolio manager with Federated Investors. "You get a sense in your stomach that we don't know how to price this and that markets could fall more.

The Fed and other central banks have dramatically stepped up efforts to stabilise capital markets and liquidity but investors continue to clamour for massive spending packages by governments around the world to offset the pain from closures of schools, restaurants, cinemas and sporting events. Companies around the world have scaled back activity to accommodate government demands to limit social interaction.

In the latest attempts to stem the spread of the virus, Mr Trump said Americans should avoid gathering in groups of more than 10 people and stop eating out at restaurants and bars. The San Francisco Bay Area is requiring people to stay home except for essential needs. Canada shut its border to most foreigners as cases worldwide top 169,000 worldwide and deaths exceed 6,600.

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