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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

Treat with caution: rocketing stocks aren't cause for comfort

NEW YORK (Reuters) – Those pining for a bottom to the gut-wrenching stock market selloff may be disappointed to learn that mega one-day rallies like the historic one witnessed on Tuesday are typically not the start of a durable recovery.

U.S. stocks, that recently entered a bear market – a fall of 20% or more from recent highs – rebounded strongly on Tuesday after U.S. lawmakers said they were close to a deal for an economic rescue package in response to the coronavirus outbreak, injecting optimism to a market grappling with its biggest selloff since the financial crisis.

The Dow Jones Industrial Average .DJI soared 11.37%, its largest one-day percentage gain since 1933, while the S&P 500 .SPX jumped 9.38% to 2,447.33, its biggest one-day percentage rise since 2008.

All the same, data suggest investors should treat the rally in stocks with caution.

Of the twenty past instances when the S&P rallied 8% or more on a single day, thirteen of them took place when stocks were in the embrace of a bear market.

(GRAPHIC: Bear market euphoria – here)

“These 8% rallies are not necessarily signs of health,” said Christopher Murphy, co-head of derivatives at Susquehanna Financial Group.

In a note on Tuesday, Murphy wrote, “It is important to remember that some of the largest one‐day rallies in SPX’s history took place during bear markets, implying that one day pops are not uncommon in a down market.”

Nor are such sharp rallies a herald of better days.

In 2008, for instance, the two biggest gains during the market crash that fall, both in October 2008, were actually followed by five more months of double-digit declines, data showed.

“You can’t take this bounce and say that (the market) will turn around next week or the week after,” said Quincy Krosby, chief market strategist at Prudential Financial in Newark, New Jersey.

A lot will depend on whether monetary and fiscal response can stave off a prolonged downturn, Krosby said.

Going by history, those looking to time the end of the bear market should be more encouraged by days when investors take modest bites at risky assets rather than great big mouthfuls.

In 2009, the bull market was born with a 6.4% up day for the S&P 500. In 2002/2003 the recovery began with 3% up days.

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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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Economy

GLOBAL MARKETS-Market panic lingers despite unprecedented Fed support

(Adds gold settlement prices, aluminum, copper milestones)

* World FX rates in 2020 tmsnrt.rs/2egbfVh

By Rodrigo Campos

NEW YORK, March 23 (Reuters) – Global equities slid further and safe-haven assets rose on Monday after a massive array of new programs from the U.S. Federal Reserve underscored the “severe” disruptions the coronavirus pandemic poses to a fast-weakening world economy.

Traditional safe-havens such as gold, U.S. Treasury and German debt rose while industrial metals fell as the outlook for global growth grew dimmer.

London aluminum prices slumped to their lowest since June 2016 while Shanghai copper fell to the weakest in nearly 11 years on fears that the lockdowns among a growing number of countries will usher in a severe recession.

Oil prices extended their decline as the coronavirus epidemic crushes demand worldwide.

The Fed for the first time will back purchases of corporate bonds, backstop direct loans to companies and “soon” will roll out a program to get credit to small and medium-sized business as it intervenes beyond the financial markets.

“While great uncertainty remains, it has become clear that our economy will face severe disruptions,” the Fed said in a statement.

While S&P 500 futures rose sharply after the announcement, U.S. stocks mostly traded in the red from the opening bell, dropping almost 5% at one point.

“It’s their bazooka moment. It’s their ‘We’ll do whatever it takes’ moment,” said Russell Price, chief economist at Ameriprise Financial Services in Troy, Michigan, said about the U.S. central bank’s latest move.

“But quite frankly the market is just in a waiting period right now until the virus runs its course and some of the therapies and other treatments are able to improve outcomes.”

Morgan Stanley analysts said they expect global growth to dip close to global financial crisis lows and U.S. growth to drop to a 74-year low in 2020. Goldman Sachs sent a similar warning.

The Dow Jones Industrial Average fell 757.69 points, or 3.95%, to 18,416.29, the S&P 500 lost 86.52 points, or 3.75%, to 2,218.4 and the Nasdaq Composite dropped 97.71 points, or 1.42%, to 6,781.81.

The Dow at one point traded below its closing level on Nov. 8, 2016, effectively erasing all the gains since the election of Donald Trump as U.S. president.

The pan-European STOXX 600 index lost 4.30% and MSCI’s gauge of stocks across the globe shed 3.81%.

Emerging market stocks lost 5.61%. MSCI’s broadest index of Asia-Pacific shares outside Japan closed 5.75% lower, while Japan’s Nikkei rose 2.02%.

Globally, analysts are dreading data on weekly U.S. jobless claims due on Thursday amid forecasts they could balloon by 750,000 and possibly by more than a million.

The Fed’s moves put pressure on the U.S. dollar, which has risen sharply as the panic-selling drives investors toward the liquidity of the greenback and to dollar-denominated assets.

The buying continued in U.S. Treasuries, for example, and yields fell sharply.

“At the end of the day, the Fed’s injections announced Monday are designed to backstop liquidity in market functioning but cannot avert the economic calamity that’s already underway,” said Jon Hill, U.S. rates strategist at BMO Capital Markets.

“It really is just trying to make sure markets work and companies and municipalities can access markets when needed, but that doesn’t mean layoffs aren’t coming, it doesn’t mean that a recession is not coming. And if you’re the equity market, it’s really hard to rally even on that news.”

Benchmark 10-year Treasury notes last rose 1-29/32 in price to yield 0.7452%, from 0.938% late on Friday. The 30-year bond last rose 4-30/32 in price to yield 1.3719%, from 1.562%.

The dollar index was little changed after falling as much as 0.84% after the Fed’s announcements. The dollar fell 0.127%, with the euro up 0.45% to $1.0742.

The Japanese yen weakened 0.52% versus the greenback at 111.34 per dollar, while Sterling was last trading at $1.1529, down 0.96% on the day.

U.S. gold futures settled 5.5% higher at $1,567.60 an ounce.

Investors are waiting on the U.S. government to pass stimulus to support the economy.

“I think the one thing we really need to see is more fiscal ammunition coming to the fore,” said Mazen Issa, senior currency strategist at TD Securities in New York. “You’ve got to think about those that are asked to be socially distant and stay home from work and not earn a paycheck, and they’re taking their time to make them whole. They need to speed it up.”

U.S. crude recently rose 3% to $23.31 per barrel and Brent was recently at $27.10, up 0.44% on the day.

Spot gold added 3.7% to $1,552.49 an ounce.

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Economy

MORNING BID-On the edge again

A look at the day ahead from chief correspondent emerging markets Karin Strohecker. The views expressed are her own.

A rising number of countries heading into lockdown, frantic policy makers around the globe and an impasse in the U.S. Senate to pass a $1 trillion coronavirus response bill has financial markets on the edge again on Monday. Stock markets are dropping and oil prices are under pressure, U.S. Treasury yields have slipped towards one-week lows while the dollar gains.

G20 finance ministers are meeting by teleconference on how to deal with the fallout from the coronavirus and measures taken to slow its spread. Germany is readying an emergency budget worth more than 150 billion euros to shore up Europe’s largest economy. Yet that does little to stop those forecasts of economic doom and gloom coming in hard and fast. Goldman Sachs talks of a sudden stop for the global economy, which it predicts will contract around 1% in 2020 – a sharper decline than the 2008/2009 global financial crisis.

European stocks followed Asia’s lead lower, with Frankfurt, Paris and London down around 4%. Asian markets suffered hefty losses with South Korea, Hong Kong and China mainland falling 2% to 4%. Wall Street futures indicate a fall of 2.6% to 4% at the open.

European companies are adjusting to what looks more and more like a war economy. In an unprecedented move, high-end fashion labels Saint Laurent and Balenciaga (Kering) will start making face masks to ease shortages. French perfume makers owned by LVMH started producing disinfectant gel and Nivea-maker Beiersdorf started serial production of medical-grade disinfectants. Dutch health technology company Philips is ramping up production of critical healthcare products.

In other areas, production is severely slowed or halted altogether. India’s biggest automaker, Maruti Suzuki India, and Mahindra & Mahindra, Mercedes-Benz, Fiat Chrysler Automobiles (FCA) and Hyundai Motor Co said they would halt car production in the country. Brutal measures are being taken: Primark said it would close all of its stores around the world, losing roughly 650 million pounds ($760 million) worth of net sales a month.

The new normal means dividends, buybacks and guidance are now a thing of the past. Shell has suspended the next tranche of its share buyback plan. Norway’s Equinor has put its $5 billion share buyback programme on hold. Swedish home appliance maker Electrolux scrapped its payout and Airbus dropped its proposed 1.4 billion 2019 dividend, suspended funding to top up staff pension schemes, and withdrew its 2020 financial guidance. French broadcaster TF1 has cancelled its guidance and the lack of financial forecast has become a headache for analysts. The Financial Conduct Authority said on Saturday that Britain’s listed companies should not publish preliminary financial statements for at least two weeks to better assess the coronavirus impact.

In fixed income, U.S. Treasury yields were lower in early European trade, with the 10-year benchmark yields falling 14 bps at 0.80% – their lowest in almost a week. In euro zone bond markets, there is an eerie calm after the wild swings and heightened volatility of the past week as investors assessed the impact of significant monetary and fiscal stimulus. Germany over the weekend said it is readying an emergency budget worth more than 150 billion euros. Most German bond yields were little changed in early trade. Italian bonds came under some selling pressure.

In currencies, the dollar recouped its losses overnight and was head towards last week’s more than three-year high. The Australian dollar and the kiwi dollar led losses. Also aiding the dollar’s gains are latest positioning data, which showed a big flip to net U.S. dollar short positions.

In emerging markets, equities resumed their downward spiral. The MSCI index tumbed 4.3% and many developing currencies got hammered. The Indian rupee weakened 1.3% and sank to an all-time low against the dollar. The South Korean won shed 1.5% and the Thai baht fell 1.4% following an unexpected rate cut by the Bank of Thailand over the weekend.

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Business

Rout resumes as more nations self-isolate against virus

LONDON/SYDNEY/HONG KONG (Reuters) – Financial markets around the world took another hammering on Monday as a rising tide of national coronavirus lockdowns threatened to overwhelm policymakers’ frantic efforts to cushion what is likely to be a deep global recession.

European stocks dived 4.5% as they reopened and commodity markets also saw more heavy selling as the global death toll from the virus passed 14,000.

Investors tried to take cover in ultra-safe government bonds and in the Japanese yen in currency markets but with so much uncertainty about when any semblance of normality might return there were few places to really hide.

“Further deterioration in the COVID-19 outbreak is severely damaging the global economy,” Morgan Stanley analysts warned on Monday. “We expect global growth to dip close to GFC (global financial crisis) lows, and U.S. growth to a 74-year low in 2020.”

Goldman Sachs sent a similar warning and in a taste of the pain to come, E-Mini futures for the S&P 500 dived 3.5% [.N] and MSCI’s main world stocks index was down 1.6% and almost at 4-year lows.

UBS Australian head of equities distribution George Kanaan said global financial markets were gripped by fear, which seemed unlikely to ease any time soon, despite the co-ordinated efforts of governments and central banks around the world.

“I have been in the financial markets for 27 years and I have never seen anything like this,” he told Reuters by telephone from Sydney.

“This is unprecedented in terms of fears and there are two elements driving that.

“First is that this involves masses of people. In the GFC, that was an event that occurred in the investment banks around the world, it didn’t involve people on the street. The second is that social media is helping to drive this fear and panic.”

In Asian trade, MSCI’s broadest index of Asia-Pacific shares outside Japan lost 5.4%, with New Zealand’s market shedding a record 10% at one point as the government closed all non-essential businesses.

Shanghai blue chips dropped 3.3%, though Japan’s Nikkei rose 2.0% aided by expectations of more aggressive asset buying by the Bank of Japan. In Australia, the S&P/ASX200 dropped 5.62% to take the index to a seven-year low.

Globally, analysts are dreading data on weekly U.S. jobless claims due on Thursday amid forecasts they could balloon by 750,000, and possibly by more than a million.

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

In contrast to the response by authorities to the global health crisis, however, are calls from some on Wall Street to ease restrictions as soon as possible to give the economy room to recover.

“Extreme measures to flatten the virus ‘curve’ is sensible-for a time-to stretch out the strain on health infrastructure,” former Goldman Sachs Chief Executive Lloyd Blankfein tweeted.

“But crushing the economy, jobs and morale is also a health issue-and beyond. Within a very few weeks let those with a lower risk to the disease return to work.”

MOUNTING ECONOMIC TOLL

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%. European benchmarks like German Bunds were at around -0.36% down more than 20 bps from last week’s 10-month highs.

Calls were continuing for the euro zone’s 19 governments to issue the bloc’s first joint bonds to try to get the region through the economic crush of the virus lockdowns.

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 0.5% to 110.31 yen while the euro recouped losses to be up 0.1% at $1.0705.

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

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

Oil prices were sharply lower. Brent crude futures dropped $1.30, or 4.9%, to $25.66 a barrel, while U.S. crude was down 29 cent to $22.34.

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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

Wall Street stares down another bleak week, with coronavirus risks amplified

NEW YORK (Reuters) – Wall Street analysts and investment managers expect another rough week for U.S. markets due to coronavirus fears, with a wild open for futures on Sunday evening as lawmakers battled over an economic aid package in Washington.

Stock-market futures fell sharply and Treasury-bond futures rose, signaling more “flight-to-safety” trades in the week ahead. Despite the historic plunge in share prices over the past few weeks, it is difficult to predict a bottom, Wall Street analysts and investment managers said.

“We need to get some stabilization in news flow before the markets turn,” said Carol Schleif, deputy chief investment officer at Abbot Downing.

The spread of coronavirus across the greater New York City area may be feeding into anxiety on Wall Street, she said. Cases there skyrocketed over the weekend, with Mayor Bill de Blasio saying hospital staff are 10 days away from running out of crucial supplies.

The total number of U.S. coronavirus cases rose to more than 33,000 as of Sunday afternoon, up from about 3,600 a week earlier, according to Reuters’ tally. At least 390 people have died.

(Click here here for a graphic of U.S. coronavirus cases.)

Several states have expanded their restrictions on business operations or non-essential movement by citizens in recent days. Nearly one in three Americans is now being ordered to stay home, with bustling cities such as New York and Las Vegas all but shut down.

U.S. stocks have already fallen more than 30% from their mid-February peak as the pandemic has spread, with even the safest areas of the bond market experiencing liquidity stress in a market rout not seen since the 2008 financial crisis.

Just after futures opened on Sunday night, S&P 500 e-minis ESC1 fell 5% to hit their lower limit, oil prices dropped and Treasury bond futures rose sharply.

The decline in economic activity will obviously have a severe impact on the U.S. economy and corporate profits, but market strategists and economists said it is difficult to predict just how severe.

Three major factors are how much aid the federal government will inject into the economy, how effective the aid package’s structure will be and how long it takes for the number of new cases to start declining in the United States – also known as “flattening the coronavirus curve.”

On Sunday, U.S. Treasury Secretary Steven Mnuchin said Congress was close to finalizing a relief package that would offer families a one-time $3,000 payment and markets another $4 trillion to support the economy.

But it was not clear when such a measure might pass, as lawmakers argued about the particulars. A bill failed to get through the first procedural hurdle in the Senate on Sunday night.

Economic data set to be released this week, including jobless claims, IHS Markit’s manufacturing survey and consumer sentiment, will help determine where things stand, said Oliver Pursche, chief market strategist at Bruderman Asset Management in New York. But he emphasized that the absence of a relief package will further sour investor sentiment.

The market is simply reflecting distress in the real world, analysts said.

“This is a biological event,” said Nela Richardson, investment strategist at Edward Jones in St. Louis. “The market is a mere symptom of the global pandemic.”

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Wall Street braces for another bleak week, with coronavirus risks amplified

NEW YORK (Reuters) – Wall Street analysts and investment managers expect another rough week for U.S. markets, as coronavirus cases and deaths increase in major cities and lawmakers continue to battle over an economic aid package in Washington.

U.S. stocks have already fallen more than 30% from their mid-February peak as the pandemic has spread, with even the safest areas of the bond market experiencing liquidity stress in a market rout not seen since the 2008 financial crisis.

Even so, the pain may not be over yet, analysts and portfolio managers told Reuters on Sunday.

“This is a biological event,” said Nela Richardson, investment strategist at Edward Jones in St. Louis. “The market is a mere symptom of the global pandemic.”

Over the weekend, several states expanded their restrictions on business operations or non-essential movement by citizens. Nearly one in four Americans is now being ordered to stay home, with bustling cities such as New York and Las Vegas all but shut down.

The number of U.S. coronavirus cases rose to more than 33,000 as of Sunday afternoon, up from about 3,600 a week earlier, according to Reuters’ tally. At least 390 people have died. The number of cases in New York City skyrocketed, with Mayor Bill de Blasio saying hospital staff are 10 days away from running out of crucial supplies.

(Click here here for a graphic of U.S. coronavirus cases.)

The decline in economic activity will obviously have a severe impact on the U.S. economy and corporate profits, but market strategists and economists said it is difficult to predict just how severe.

Three major factors are how much aid the federal government will inject into the economy, how effective the aid package’s structure will be and how long it takes for the number of new cases to start declining in the United States – also known as “flattening the coronavirus curve.”

On Sunday, U.S. Treasury Secretary Steven Mnuchin said Congress was close to finalizing a relief package that would offer families a one-time $3,000 payment and markets another $4 trillion to support the economy. But lawmakers were still arguing about the particulars, and it was not clear when such a support measure might pass.

While fiscal stimulus and monetary policy measures would aid greatly in an eventual recovery of the U.S. economy, it would take time for them to have a large impact on Wall Street’s near-term performance, Richardson said.

But if disagreements in Congress were to delay the passage of a relief package, that could further sour investor sentiment heading into Monday’s market open, said Oliver Pursche, chief market strategist at Bruderman Asset Management in New York.

“If that headline holds, that’s probably going to be negative for the market,” he said.

Searching for a bottom, some analysts said things could eventually get as bad as the 2008-2009 meltdown, when stocks fell 57% and quarterly U.S. gross domestic product fell as much as 4% year-over-year.

That is the worst-case scenario for Barclays, according to a report on Friday by Maneesh Deshpande, the bank’s head of U.S. equity strategy and global equity derivatives strategy.

Scott Minerd, global chief investment officer at Guggenheim Partners, is not so sure.

“There’s good reason to believe that this is potentially worse than the financial crisis,” Minerd said in his weekly report.

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