Asia stocks rally on US stimulus deal; STI closes up 6.1%

Pedestrians wearing masks walk past a display showing the closing information of Tokyo's Nikkei Stock Average in Tokyo on March 24, 2020.
Pedestrians wearing masks walk past a display showing the closing information of Tokyo's Nikkei Stock Average in Tokyo on March 24, 2020.PHOTO: EPA-EFE

TOKYO (BLOOMBERG, REUTERS) - Stocks in Asia extended a rally on Wednesday (March 25) on news that the Trump administration had struck a deal with Senate Democrats and Republicans on an historic US$2 trillion (S$2.9 trillion) rescue package to curb the coronavirus pandemic's economic toll.

Asia markets were already tracking Tuesday's epic comeback on Wall Street after US lawmakers said they were close to a rescue deal. The Dow Jones Industrial Average soared more than 2,100 points, or more than 11 per cent, notching its biggest one-day percentage gain since 1933 and its best point increase ever.

On news of a deal being reached,  Japan's Nikkei index extended gains to close up 8 per cent. Its rally was aided by relief that the Tokyo Olympics is being postponed, not cancelled.

Benchmark indices in Australia surged 5.5 per cent, while South Korea jumped 5.9 per cent. Shares in Hong Kong and Shanghai rose 3.8 per cent and 2.2 per cent respectively.

Singapore shares joined in the rally with the Straits Times Index closing up 143.42 points or 6.1 per cent to 2,505.47.

Still, the course of the market is still largely dependent on how much countries can slow the pandemic and how quickly they can lift various curbs on economic activity.

Confirmed cases are now topping 400,000 globally with New York City suffering another quick and brutal rise in the number of infections to around 15,000.

"Sentiment has improved, but to call it a turning point is too strong a word for now," said James McCormick, global head of desk strategy at NatWest Markets. "It is more of a tug-of-war. Policy bazooka is in place, but will be fighting against very weak data and still worrying trends on Covid-19 data. We are more neutral on risk assets now."

About US$26 trillion has evaporated from equity markets since mid-February, and investors have been left sifting the wreckage and weighing the chances of a lasting rebound. On the one hand, Wall Street has begun to argue that liquidations are nearing an end with real-money investors like pension funds ready to step in, and there are signs of improvement in some of world's regions that were hardest-hit by the virus. But the number of infections globally continues to accelerate and many of the largest economies are grinding to a halt.

Tuesday's gain in risk assets follows an unprecedented move by the Federal Reserve to backstop large swaths of the financial system.

In the currency markets, the US dollar slipped for a third straight session as the scramble for liquidity was soothed again by the super-sized U.S. stimulus plan.

The risk-sensitive Australian dollar jumped over the 60-cent mark for the first time in a week and euro traded up 0.4 per cent up past US$1.0835 in a fourth straight day of gains.

With traders moving gradually away from safety bolt holes, the Japanese yen eased to 111.34 yen per dollar to leave it just off a one-month low.

Bond markets were also calmer. Benchmark US Treasuries were yielding 0.86 per cent while in Europe Germany's 10-year yield edged a basis point higher to -0.31 per cent, tailed by other higher-rated government debt.,

In metals markets, gold changed hands at US$1,610.0 per ounce , retaining its gains of almost 5 per cent on Tuesday, its biggest jump since 2008.

Oil prices bounced another 2 per cent as hopes for US stimulus also boosted hopes for global demand.

Brent crude futures rose to US$27.51 per barrel. That is up about US$5, or about 13 per cent, from their 18-year intraday low on Friday. Still on the month, the market is down 45 per cent.