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Business

Asian markets tread cautiously ahead of U.S. stimulus, jobs

SINGAPORE (Reuters) – Asian stock markets made a cautious start on Thursday following two days of rallies, as investors await the passage and details of a $2 trillion stimulus package in the United States to combat the economic fallout from the coronavirus.

Senate leaders hope to vote on the plan later on Wednesday in Washington, but it still faces criticism. The bill includes a $500 billion fund to help hard-hit industries and a comparable amount for payments up to $3,000 to millions of U.S. families.

It cannot come soon enough, with potentially enormous weekly U.S. initial jobless claims to appear in data due at 1230 GMT.

Australia’s S&P/ASX 200 index rose 1.5% in early trade – its third positive start in as many sessions, but also its most muted. Japan’s Nikkei fell 2.2%.

Hong Kong futures were 1% higher and China A50 futures were up 0.2%. MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.3%.

“There has been so much stimulus thrown at this,” said Jun Bei Liu, portfolio manager at Tribeca Investment Partners in Sydney.

“But the positivity related to it is really just sentiment,” she said, adding that investors were largely flying blind with so many companies withdrawing earnings guidance. Jobless figures may offer a “reality check,” she said.

In perhaps an early sign of the fragile mood, the risk-sensitive Australian dollar dropped 1% and the safe-haven Japanese yen rose in morning trade. [FRX/]

U.S. stock futures rose 1%, following the first back-to-back session rises on Wall Street in over a month.

The Dow Jones Industrial Average rose 2.4% and the S&P 500 1.2%, while the Nasdaq Composite dropped half a percent following a Nikkei report that Apple was weighing a delay in the launch of its 5G iPhone.

JOBLESS CLAIMS TO TEST BOUNCE

The money at stake in the stimulus bill amounts to nearly half of the $4.7 trillion the U.S. government spends annually.

But it also comes against a backdrop of bad news as the coronavirus spreads and as jobless claims are set to soar, with both expected to test the nascent bounce in markets this week.

California Governor Gavin Newsom told reporters on Wednesday that a million Californians had already applied for jobless benefits this month – a number that knocked stocks from session highs and has analysts bracing for worse to come.

RBC Capital Markets economists had expected a national figure over 1 million in Thursday’s data, but say “it is now poised to be many multiples of that,” as reduced hours across the country drive deep layoffs.

“Something in the 5-10 million range for initial jobless claims is quite likely,” they wrote in a note.

That compares to a 695,000 peak in 1982. Forecasts in a Reuters poll range from a minimum of 250,000 initial claims, all the way up to 4 million.

Trepidation seemed to put a halt on the U.S. dollar’s recent softness in currency markets, with the dollar ahead 1% against the Antipodean currencies and up 0.6% against the pound.

It slipped 0.3% to 110.85 yen.

U.S. crude slipped 1.5% to $24.11 per barrel and gold steadied at $1,608.14 per ounce.

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Business

Asia stocks rally, Fed launches limitless QE against economic reality

SYDNEY (Reuters) – Asian stocks rallied on Tuesday as the U.S. Federal Reserve’s sweeping pledge to spend whatever it took to stabilize the financial system eased debt market pressures, even if it could not offset the immediate economic hit of the coronavirus.

While Wall Street seemed unimpressed, investors in Asia were encouraged enough to lift E-Mini futures for the S&P 500 ESc1 by 1.9% and Japan’s Nikkei .N225 by 4.9%.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS added 1.2%, though that followed a drop of almost 6% on Monday. South Korea .KS11 and Australia also recouped a little of their recent losses.

In its latest drastic step, the Fed offered to buy unlimited amounts of assets to steady markets and expanded its mandate to corporate and muni bonds.

The numbers were certainly large, with analysts estimating the package could make $4 trillion or more in loans to non-financial firms.

“This open-ended and massively stepped-up program of QE is a very clear signal that the Fed will do all that is needed to maintain the integrity and liquidity of the Treasury market, key asset-backed markets and other core markets,” said David de Garis, a director of economics at NAB.

“COVID-19 developments remain the wild card, as is the development of government policies to support cash flow and the economy.”

The Fed’s package helped calm nerves in bond markets where yields on two-year Treasuries hit their lowest sine 2013, while 10-year yields dropped back sharply to 0.77% US10YT=RR.

Yet analysts fear it will do little to offset the near-term economic damage done by mass lockdowns and layoffs.

Speculation is mounting data due on Thursday will show U.S. jobless claims rose an eye-watering 1 million last week, with forecasts ranging as high as 4 million.

Goldman Sachs warned the U.S. economic growth could contract by 24% in the second quarter, two-and-a-half times as large as the previous postwar record.

A range of flash surveys on European and U.S. manufacturing for March are due later on Tuesday and are expected to show deep declines into recessionary territory.

While governments around the globe are launching ever-larger fiscal stimulus packages, the latest U.S. effort remains stalled in the Senate as Democrats said it contained too little money for hospitals and not enough limits on funds for big business.

The logjam combined with the stimulus splash from the Fed to take a little of the shine off the U.S. dollar, though it remains in demand as a global store of liquidity.

“The special role of the USD in the world’s financial system – it is used globally in a range of transactions such as commodity pricing, bond issuance and international bank lending – means USD liquidity is at a premium,” said CBA economist Joseph Capurso.

“While liquidity is an issue, the USD will remain strong.”

The dollar eased just a touch on the yen to 110.90 JPY= after hitting a one-month top at 111.59 on Monday, while the euro inched up to $1.0754 EUR= from a three-year trough of $1.0635.

The dollar index stood at 102.120 =USD, off a three-year peak of 102.99.

Gold surged in the wake of the Fed’s promise of yet more cheap money, and was last at $1,564.51 per ounce XAU= having rallied from a low of $1,484.65 on Monday. [GOL/]

Oil prices also bounced after recent savage losses, with U.S. crude CLc1 up 64 cents at $24.00 barrel. Brent crude LCOc1 firmed 53 cents to $27.56. [O/R]

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Business

Asia stocks set to rally as Fed goes limitless

SYDNEY (Reuters) – Asian stocks were set to rally on Tuesday as the U.S. Federal Reserve’s sweeping pledge to spend whatever it took to stabilize the financial system eased debt market pressures, even if it could not offset the immediate economic hit of the coronavirus.

While Wall Street still finished lower, investors in Asia were encouraged enough to lift E-Mini futures for the S&P 500 ESc1 by 2%.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS added 0.5% in early trade, while Nikkei futures NKc1 traded at 18,115 compared to a cash close of 16,887.

In its latest drastic step, the Fed offered to buy unlimited amounts of assets to steady markets and expanded its mandate to corporate and muni bonds.

The numbers were certainly large, with analysts estimating the package could make $4 trillion or more in loans to non-financial firms.

“This open-ended and massively stepped-up program of QE is a very clear signal that the Fed will do all that is needed to maintain the integrity and liquidity of the Treasury market, key asset-backed markets and other core markets,” said David de Garis, a director of economics at NAB.

“COVID-19 developments remain the wild card, as is the development of government policies to support cash flow and the economy.”

The Fed’s package helped calm nerves in bond markets where yields on two-year Treasuries hit their lowest sine 2013, while 10-year yields dropped back sharply to 0.77% US10YT=RR.

Yet analysts fear it will do little to offset the near-term economic damage done by mass lockdowns and layoffs.

Speculation is mounting data due on Thursday will show U.S. jobless claims rose an eye-watering 1 million last week, with forecasts ranging as high as 4 million.

Goldman Sachs warned the U.S. economic growth could contract by 24% in the second quarter, two-and-a-half times as large as the previous postwar record.

A range of flash surveys on European and U.S. manufacturing for March are due later on Tuesday and are expected to show deep declines into recessionary territory.

While governments around the globe are launching ever-larger fiscal stimulus packages, the latest U.S. effort remains stalled in the Senate as Democrats said it contained too little money for hospitals and not enough limits on funds for big business.

The logjam combined with the stimulus splash from the Fed to take a little of the shine off the U.S. dollar, though it remains in demand as a global store of liquidity.

“The special role of the USD in the world’s financial system – it is used globally in a range of transactions such as commodity pricing, bond issuance and international bank lending – means USD liquidity is at a premium,” said CBA economist Joseph Capurso.

“While liquidity is an issue, the USD will remain strong.”

The dollar eased just a touch on the yen to 110.90 JPY= after hitting a one-month top at 111.59 on Monday, while the euro inched up to $1.0756 EUR= from a three-year trough of $1.0635.

The dollar index dipped 0.3% to 102.140 =USD.

Gold surged in the wake of the Fed’s promise of yet more cheap money, and was last at $1,564.51 per ounce XAU= having rallied from a low of $1,484.65 on Monday. [GOL/]

Oil prices also bounced a little after recent savage losses, with U.S. crude CLc1 up $1.16 at $24.52 barrel.[O/R]

Graphic: Asian stock markets here

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Business

Asia shares dive with S&P 500, bond yields fall anew

SYDNEY (Reuters) – Asian shares slid on Monday as more countries all but shut down in the fight against the coronavirus, threatening to overwhelm policymakers’ frantic efforts to cushion what is clear to be a deep global recession.

In a taste of the pain to come, E-Mini futures for the S&P 500 dived 5% at the open to be limit down.

MSCI’s broadest index of Asia-Pacific shares outside Japan lost 2%, with South Korea badly hit.

Japan’s Nikkei added 0.8%, perhaps aided by expectations of more asset buying by the Bank of Japan, but the commodity-heavy Australian market shed 5%.

Oil was not far behind as mass bans on travel worldwide crushed demand for fuel.

Airlines cancelled more flights as Australia and New Zealand advised against non-essential domestic travel, the United Arab Emirates (UAE) halted flights for two weeks and Singapore and Taiwan banned foreign transit passengers.

Brent crude futures slid $1.68 to $25.30 a barrel, while U.S. crude shed $1.01 to $21.62. [O/R]

Analysts fear the collapse in oil and other commodity prices will set off a deflationary wave making it harder for monetary policy easing to gain traction as economies shut down.

Nearly one in three Americans were ordered to stay home on Sunday to slow the spread of the disease, while Italy banned internal travel as deaths there reached 5,476.

U.S. President Donald Trump went on TV to approve disaster deceleration requests from New York and Washington, while St. Louis Federal Reserve President James Bullard warned unemployment could reach 30% unless more was done fiscally.

U.S. stocks have already fallen more than 30% from their mid-February and even the safest areas of the bond market experiencing liquidity stress as distressed funds are forced to sell good assets to cover positions gone bad.

WAITING ON THE DISEASE

“It would be a brave, or foolish, man to call the bottom in equities without a dramatic medical breakthrough,” said Alan Ruskin, head of G10 FX strategy at Deutsche Bank.

Also needed would be evidence that China could re-emerge from the virus without reigniting infections, and that other major economies had hit inflection points for infection rates, he added.

“Even were social distancing to subside at the earliest plausible dates in Europe and the U.S., it will have done extraordinary damage to confidence in a host of key sectors,” Ruskin said.

The mounting economic toll led to a major rally in sovereign bonds late last week, with efforts by central banks to restore liquidity in the market allowing for more two-way trade.

Yields on the benchmark U.S. 10-year note were down at 0.80%, having dived all the way to 0.84% on Friday from a top of 1.28%.

In New Zealand, the central bank announced its first outright purchase of government paper aiming to inject much-needed liquidity into the local market.

In currency markets, the first instinct on Monday was to dump those leveraged to global growth and commodity prices, sending the Australian dollar down 0.8% to $0.5749.

The U.S. dollar started firm but took a step back after partisan battles in the U.S. Senate stopped a coronavirus response bill from advancing.

The dollar eased 0.4% to 110.43 yen, while the euro recouped losses to be flat at $1.0692.

Against a basket of currencies the dollar was still a fraction firmer at 102.510.

The dollar was a major gainer last week as investors fled to the liquidity of the world’s reserve currency, while some funds, companies and countries sought more cash to cover their dollar borrowings.

“The ‘dash for cash’ will remain a key driver of currency markets this week,” said Kim Mundy, a currency strategist at CBA.

“We expect strong USD demand to continue to cause liquidity problems and keep volatility elevated. Direct intervention by central banks in currency markets to reduce market dysfunction is possible.”

The steady rise in the dollar undermined gold, which slipped 0.3% to $1,493.83 per ounce. [GOL/]

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Business

Asia shares rally after rout; U.S., European futures higher

SYDNEY (Reuters) – Asian shares made a partial comeback from a global rout on Friday but still nursed massive losses for the week, while bonds rallied and oil extended its gains.

European shares were set for similar gains. Early in the European day, pan-region Euro Stoxx 50 futures were up 1.87%, German DAX futures gained 1.86% and FTSE futures.

U.S. S&P 500 e-mini stock futures also pointed to a brighter end to the week, adding 1.7%.

In afternoon trade in Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan was 4.41% higher, ending a seven-sessions streak of losses.

But in an indication of the deep damage inflicted on global equities from pandemic fears, the index remains set to finish more than 10% lower this week. It lost 11.1% last week.

As the spread of the coronavirus brought much of the world to a halt, nations have poured ever-more-massive amounts of stimulus into their economies while central banks have flooded markets with cheap dollars to ease funding strains.

The U.S. Senate was debating a $1 trillion-plus package that would include direct financial help for Americans, relief for small businesses and steps to stabilize the economy.

Sources told Reuters that China was set to unleash trillions of yuan of fiscal stimulus to revive an economy facing its first contraction in four decades, though on Friday the country surprised markets by keeping its lending benchmark unchanged.

“The speed and aggression with which authorities are wheeling out measures to cushion the economic fallout from the virus and sowing the seeds for a hopefully rapid recovery, has resonated somewhat in equity markets,” said Ray Attrill, head of FX strategy at NAB.

“Yet there is little doubt that funds need to buy dollars to rebalance hedges in light of the 30% fall in equity markets so far this month,” he added. “The dollar remains the pre-eminent safe-haven asset during times of extreme market stress.”

The dollar’s surge is a nightmare for the many countries and companies that have borrowed heavily in the dollar, leading to yet more selling of emerging market currencies in a negative feedback loop.

Such was the stress that dealers hear whispers of a new Plaza Accord, the 1985 agreement when major central banks used mass intervention to restrain a rampant dollar.

For now, investors in Asia were merely happy Wall Street had not plunged again and South Korean shares bounced 7.4%, though that still left them down more than 11% for the week.

Australia’s beleaguered market eked out a 0.70% gain, and futures for Japan’s Nikkei were trading up at 17,710, compared to a cash close of 16,552.

OIL RELIEF

Aiding sentiment was a 25% rally in oil prices overnight. U.S. crude was 3.25% higher at $26.04 a barrel on Friday, up from a low of $20.09, while Brent crude stood at $29.14. [O/R]

This was a major relief as the collapse of crude prices had blown a huge hole in the budgets of many oil producers and forced them to dump any liquid asset to raise cash, with U.S. Treasuries a particular casualty.

That was one reason yields on U.S. 10-year Treasuries had climbed over 100 basis points in just nine sessions to reach 1.279%, before steadying a little at 1.1533%.

At the same time, funds across the world were fleeing to the liquidity of U.S. dollars, lifting it to peaks last seen in January 2017 against a basket of its peers.

“Such price action suggests significant market stress, particularly on the wide range of entities outside the U.S. that have borrowed in dollars,” said Richard Franulovich, head of FX strategy at Westpac.

“It could last until global capital flows and investor risk appetite normalizes, possibly months away.”

The euro rose 0.65% to $1.0759 but was not far off three-year lows, having shed more than 3% for the week so far – the steepest decline since mid-2015. The dollar did ease back to 109.88 yen, but was still up nearly 1.9% on the week.

Sterling continued its wild swings with a rally to $1.1677, having earlier hit its lowest since 1985 around $1.1404. It was still down nearly 5% for the week.

The jump in the dollar has made gold more expensive in other currencies. While it rallied on Friday to $1,494.48 per ounce, it remains down about 2.5% on the week. [GOL/]

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Business

Asian stocks fight for a toehold as ECB stimulus slows panic

SINGAPORE (Reuters) – Asian stocks struggled to find their footing in volatile trade on Thursday, as the latest promise of stimulus from the European Central Bank propped up sentiment while the world struggles to contain the coronavirus pandemic.

U.S. stock futures EScv1 turned positive and rose nearly 2% after the ECB announced a bond-buying program. Japan’s Nikkei .N225 opened 1.4% higher.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS dipped 0.25% amid choppy trade throughout the region, with Australia’s benchmark running as much as 3% higher before returning to flat and Korea’s Kospi .KS11 gyrating.

The ECB will buy 750 billion euro ($820 billion) in bonds through 2020, with Greek debt and non-financial commercial paper eligible under the program for the first time.

“It’s given us a shot in the arm,” said Michael McCarthy, chief market strategist at brokerage CMC Markets in Sydney, but he added he expects it to be short-lived.

“This is about the impact on demand and the disruption of global supply chain…(bond buying) is not speaking directly to the key problem for markets. I doubt very much this is a turning point,” he said.

Underlining the fragility of sentiment

Overnight on Wall Street, the S&P 500 .SPX fell 5% and is down nearly 30% over a month. Household-name blue chips plunged, with General Motors (GM.N) and Boeing (BA.N), each symbols of U.S. industrial might, losing more than 17% in a single day.

Selling extended across almost all asset classes as investors liquidated portfolios.

Benchmark U.S. 10-year Treasuries US10YT=RR, usually a haven in times of turmoil, suffered their sharpest two-day selloff in nearly 20 years. Gold XAU= is down 3% for the week and oil fell to an 18-year low as quarantine lockdowns spread across the globe.

In currency markets, the dollar is king and jumped to a three-year high overnight amid a rush for the world’s reserve currency in times of crisis.

On Wednesday, the virus outbreak worsened. Italy reported the largest single-day death toll from coronavirus since the outbreak began in China in late 2019.

It has killed more than 8,700 people globally, infected more than 212,000 and prompted emergency lockdowns on a scale not seen in living memory.

“It is serious. Take it seriously,” German Chancellor Angela Merkel told her nation in a televised speech amid the shutdown of almost everything except bakeries, banks, pharmacies and grocers.

The ECB’s move follows emergency interest rate cuts around the globe, enormous fiscal support packages and six central banks promising discount dollars to banks to alleviate a squeeze in greenback funding.

But so far none of it has been able to put a floor under dire sentiment, and some $15 trillion in shareholder value has been wiped out in little more than a month of heavy selling.

The U.S. economy could shrink 14% next quarter, a JP Morgan economist said on Wednesday, one of the most dire calls yet on the potential hit to the United States.

“I’d say the market is uninvestable at this point,” said Daniel Cuthbertson, managing director at Value Point Asset Management in Sydney. “Until we get a containment of global contractions, the market is just going to be directionless.”

On Thursday, the Reserve Bank of Australia pumped a record $7.4 billion into the banking system and is due to make an out-of-cycle policy announcement at 0330 GMT.

Investors are also looking to a March German sentiment survey due at 0900 GMT and U.S. jobless figures due at 1230 GMT for early signals on how the virus is hitting two of the world’s economic powerhouses.

Oil bounced back in Asian trade, with U.S. crude CLc1 last up 17% to $23.84 and Brent LCOc1 up $2 to $27.06.

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Business

Global stocks drop as investors shun risk on coronavirus fears

TOKYO (Reuters) – U.S. stock futures and several Asian shares fell in choppy trade on Wednesday, as worries about the coronavirus pandemic eclipsed hopes broad policy support would combat the economic fallout of the outbreak.

Most traditional safe-haven assets were also under pressure as battered investors looked to unwind their damaged positions, leading to wide discrepancies between various markets.

In Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan dipped 0.3%, led by a 4.9% fall in Australia while Japan’s Nikkei gained 1.6%.

U.S. stock futures fell 3% in Asia, a day after the S&P 500 rose 6% and Dow Jones rose 5.2% or 1,049 points.

“A rise of 1,000 points in Dow is something you see only during a financial crisis. It is not a good sign,” said Tomoaki Shishido, senior fixed income strategist at Nomura Securities.

“A rise of 100 points would much better for the economy.”

Wild swings in markets imply the capacity of various players, from speculators to brokerages, to absorb risks has been tormented, analysts say.

The increase in the S&P 500 futures the previous day, still down more than 10% so far this week, came as policymakers cobbled together packages to counter the impact of the virus.

The Trump administration on Tuesday unveiled a $1 trillion stimulus package that could deliver $1,000 cheques to Americans within two weeks to buttress an economy hit by coronavirus while many other governments look to fiscal stimulus.

“That would be bigger than a $787 billion package the Obama administration came up with after the Lehman crisis, so in terms of size it is quite big,” said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management.

“Yet stock markets will likely remain capped by worries about the spreading coronavirus,” he said.

Britain unveiled a 330 billion pounds ($400 billion) rescue package for businesses threatened with collapse while France is to pump 45 billion euros ($50 billion) of crisis measures into its economy to help companies and workers.

Still, forecasters at banks are projecting a steep economic contraction in at least the second quarter as governments take draconian measures to combat the virus, shutting restaurants, closing schools and calling on people to stay home.

The U.S. Federal Reserve stepped in again on Tuesday to ease funding stress among corporates by reopening its Commercial Paper Funding Facility to underwrite short-term corporate loans.

“While markets react to positive news on stimulus, that doesn’t last long. I think there are a lot of banks and investors whose balance sheet was badly hit and they still have lots of positions to sell,” said Shin-ichiro Kadota, senior currency and rates strategist at Barclays.

BOND AND CURRENCIES

The damage to markets was apparent in bond markets as well.

U.S. Treasuries extended their losses, driving the benchmark 10-year yield to 1.009%. It hit a two-week high of 1.105% in the previous day, rising more than 30 basis points.

“The staggering thing is, bonds have fallen even as the Fed has been buying 40 billion dollars of bonds every day. That far outpaces the Fed’s previous episodes of quantitative easing and shows just how much selling pressure there is now,” said Nomura’s Shishido.

Some market players said talk of big stimulus is raising concerns about the long-term outlook of U.S. fiscal health, putting pressure on long-term U.S. government bonds.

The spread between 30-year and five-year yields rose to almost 1%, the highest since September 2017.

The U.S. 30-year bonds yield jumped 38 basis points on Tuesday to 1.648%.

In the currency market, a shortage of dollar cash supported the U.S. currency.

The Australian dollar bounced back to $0.6008 after having hit a 17-year low of low of $0.5958 the previous day.

The kiwi recovered to $0.5955 after hitting a 11-year trough of $0.5919. [FRX/]

The dollar held firm against most currencies but dipped 0.25% against the safe-haven yen to 107.28 yen.

The euro was steady at $1.1004.

U.S. benchmark oil futures sank to near their 2016 trough of around $26 per barrel on prospects of slow demand and a Saudi-instigated price war.

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Economy

Singapore overtakes Hong Kong as world's freest economy

HONG KONG (BLOOMBERG) – Hong Kong lost its title as the world’s freest economy to Singapore for the first time since 1995 in a global survey, as social unrest and uncertainties rattled its reputation as a global financial hub.

Hong Kong’s overall economic freedom score fell primarily due to a decline in its marks for investment freedom, according to the 2020 Index of Economic Freedom published by the Heritage Foundation. Singapore, its long-time regional rival, came in first as its score held steady compared with last year.

“Hong Kong’s economy was rated the freest in the world from 1995 through 2019. The ongoing political and social turmoil has begun to erode its reputation as one of the best locations from which to do business, dampening investment inflows,” the report from the conservative Washington think-tank said.

While large-scale pro-democracy demonstrations that began last year have died down amid the coronavirus pandemic, trust in Hong Kong authorities remains at a low as community groups – including medical workers – express dissatisfaction toward them for not doing enough to stem the disease in the early weeks of the outbreak.

Mr Edward Yau, Hong Kong’s secretary for commerce and economic development, told reporters on Tuesday (March 17) that he expects to see a rebound in the rankings. “I can confidently say that the conditions that have long made Hong Kong a place with a high level of economic freedom won’t change because of what we experienced in the past.”

The city’s economy is forecast to contract for a second year after it fell into its first annual recession in a decade in 2019, facing fallout from the protests and the virus.

“Intensifying uncertainties related to security issues have undermined an otherwise favorable investment climate,” the report said. “The territory remains a dynamic global financial center with a high degree of competitiveness and openness, but the sense of risk is also heightened.”

The Hong Kong authorities have long taken pride in the city’s reputation as a stable place to do business in Asia. After topping the Heritage Foundation’s ranking for a 25th straight year last year, it said the designation reaffirmed “the government’s steadfast commitment in upholding the free market principles over the years”.

In December, it touted the rating in newspaper advertisements around the world to reassure investors that it remained free and resilient despite the months of violent clashes between demonstrators and police.

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Business

Asian markets braced for deeper rout as virus panic worsens

SINGAPORE (Reuters) – Asia’s stocks were poised to plunge further on Friday as panic gripped world financial markets and even safe-haven assets such as gold were ditched to cover losses in the wipeout.

S&P 500 futures ESc1 are down 0.5% in Asia. Nikkei futures NKc1 were 10.88% lower in late New York trade. Australia’s benchmark lost 7% and New Zealand’s index was last more than 8%, its biggest intraday drop on record.

Currency trading was erratic amid poor liquidity and a rush to secure financing in dollars. [FRX/]

Overnight, Wall Street’s Dow industrials index .DJI suffered its largest daily decline since the 1987 Black Monday crash.

The plunge, as the coronavirus pandemic spreads, gathered steam after U.S. President Donald Trump spooked investors with a move to restrict travel from Europe, and after the European Central Bank disappointed markets by holding back on rate cuts.

Trade was halted on the S&P 500 .SPX. after it hit downdraft circuit breakers. It fell further when trade resumed, eventually losing 9.5% to close 27% below February’s peak.

Gold XAU= fell 3.5%, yields on long-dated U.S. Treasuries rose amid the panic, and in the currency markets, investors stampeded into the dollar. [US/] [GOL/]

“Everyone is just de-risking,” said Stuart Oakley, Nomura’s global head of flow FX in Singapore.

“It’s not just a case of the stock market going down, anyone who’s long the stock market needs to chop out…it’s just a case of people wanting to bring risk back to flat,” he said.

In a televised address late on Wednesday, U.S. President Donald Trump imposed restrictions on travel from Europe to the United States, shocking investors and travelers.

Traders were disappointed after hoping to see broader measures to fight the spread of the virus and blunt its expected blow to economic growth.

The New York Federal Reserve pumped more liquidity to banks to try and stabilize the system as markets show signs of stress.

MSCI’s gauge of stocks across the globe .MIWD00000PUS shed 9.51% and was down more than 20% from its 52-week peak.

The VIX volatility index – Wall Street’s “fear gauge” – and an equivalent measure of volatility for the Euro Stoxx 50 .V2TX hit their highest since the 2008 financial crisis.

In early Asia currency trade volumes were light and tight liquidity exaggerated moves. The dollar handed back some gains to the yen, pound and franc and Australian dollar AUD=D3 lifted about 1% from an 11-year low to $0.6287.

The euro EUR= found footing at $1.1171 after falling as far as $1.1054 overnight.

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Business

Stocks plummet after Trump bans travel from Europe to contain coronavirus blow

TOKYO (Reuters) – Global shares crumbled on Thursday after U.S. President Donald Trump stunned investors by announcing a temporary travel ban from Europe in an effort to curb the spread of the coronavirus, threatening more disruptions to businesses and the world economy.

U.S. S&P500 futures ESc1 dived 4.7%, a day after the S&P 500 .SPX lost 4.89%, putting the index firmly in a bear market territory, defined as a 20% fall from a recent top.

Euro Stoxx 50 futures STXEc1 sank 5.8% to their lowest levels since mid-2016.

“The travel ban from Europe has definitely taken everyone by surprise,” said Khoon Goh, head of Asia Research at ANZ in Singapore.

“Already we know the economic impact is significant, and with this additional measure on top it’s just going to multiply the impact across businesses. This is something that markets had not factored in…it’s a huge near-term economic cost.”

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS lost 4.1% to its lowest level since early 2019, while Japan’s Nikkei .N225 dropped 5.3%.

Australia’s benchmark dived 7.4% while South Korea’s Kospi .KS11 fell 4.6% to a 4-1/2-year low.

Trump announced on Wednesday the United States will suspend all travel from Europe, except from the United Kingdom, to the United States for 30 days starting on Friday. Howevrr, Trump said trade will not be affected by the restrictions.

He also announced some other steps, including instructing the Treasury Department to defer tax payments for entities hit by the virus.

“For those who had been hoping for measures to offset likely fall in consumption, it was a disappointment,” said Hirokazu Kabeya, chief global strategist at Daiwa Securities. “There was no talk of payroll tax cuts.”

Investors worry whether the stimulus steps can quickly turn around the global economy as concerns grew that the number of infections could quickly snowball in many countries.

“In many European countries, the number of patients are increasing in a track similar to Italy. The U.S. appears to be following that path. It now looks realistic to expect, within 10 days, those countries could have more than ten thousands patients.”

Safe-haven assets were back in favour, though many of them were still below recent peaks, which some market players suspect reflects a desperate bout of profit-taking to make up for losses suffered elsewhere.

Gold XAU= edged up 0.5% to $1,642.5 per ounce but still stood well below Monday’s high above $1,700.

The 10-year U.S. Treasuries yield fell 8.7 basis points to 0.737% US10YT=RR, though it is still more than 40 basis points above a record low of 0.318% touched on Monday. Some analysts say the rise could reflect worries about an increase in government spending for stimulus.

The two-year yield US2YT=RR fell 4 basis points to 0.458%, but stood well above Monday’s low of 0.251%.

Fed fund rate futures <0#FF:>, however, are still pricing in a rate cut of at least 0.75 percentage points and about a 50% chance of a 1.0 percentage point cut at a policy review on March 17-18.

“The initial reaction in financial markets shows that even after Trump spoke investors feel they need to avoid risk” said Junichi Ishikawa, senior currency strategist at IG Securities in Tokyo.

“Trump has outlined what he considered to be tough measures, but movements in stocks, stock futures, and currencies show that this is not enough to ease investors’ concerns. We are in a very difficult situation now.”

Oil prices extended losses as they were also hit by renewed weakness in the stock market and as Saudi Arabia and the United Arab Emirates announced plans to escalate the burgeoning price war.

U.S. West Texas Intermediate (WTI) crude CLc1 last traded up slightly at $32.14 per barrel, down 2.5%.

In the currency market, the dollar slid against the safe-haven yen and the Swiss franc.

The U.S. currency fell 1.1% to 103.35 yen and lost 0.6% to 0.9333 franc CHF=.

The euro traded at $1.1321 EUR=, up 0.5% ahead of the European Central Bank’s policy meeting later in the day.

The ECB is all but certain to unveil new stimulus measures, including new, ultra-cheap loans for banks to pass onto small and medium-sized firms.

Markets have priced in a 10 basis point cut to its already record low minus 0.50% policy rate though many policymakers have said further cuts could be counterproductive because they hurt bank margins to the point of thwarting lending.

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