SYDNEY (Reuters) – Asian equities rebounded sharply on Tuesday as the US Federal Reserve’s promise of bottomless dollar funding eased painful tensions in the financial markets, although it could not mitigate the immediate economic blow of the coronavirus.
PHOTO FILE: a currency trader works in front of electronic cards showing the composite stock price index of Korea (KOSPI) and the exchange rate between the US dollar and South Korea won, in Seoul, South Korea , March 23, 2020. REUTERS / Heo Ran
While Wall Street didn’t look impressed, investors in Asia were encouraged enough to raise the E-Mini futures for the S&P 500 by 3% and the Japanese Nikkei by 6.2%. If sustained, it would be the biggest daily growth for Nikkei since late 2016.
MSCI’s broader index of Asia-Pacific equities outside Japan jumped 4.2%, more than halving Monday’s drop. Shanghai blue chips gained 2.7%.
Europe also showed a brighter shadow as EUROSTOXXX 50 futures rose 3.3% and FTSE futures 3.1%.
In its latest drastic step, the Fed offered to buy unlimited quantities of assets on stable markets and expanded its mandate to corporate and muni bonds.
The numbers were certainly large, with analysts estimating that the package could earn $ 4 trillion or more in loans to non-financial corporations.
“This open and heavily enhanced QE program is a very clear signal that the Fed will do whatever it takes to maintain the integrity and liquidity of the Treasury market, asset-backed key markets and other key markets,” said David de Garis. , an economics director at NAB.
The Fed package helped calm nerves in bond markets where two-year Treasury yields hit a low since 2013, while 10-year yields dropped to 0.79%.
Analysts have warned that it would do little to compensate for the short-term economic damage caused by mass blockades and layoffs.
Speculation is mounting Thursday’s data will show that unemployment claims in the United States rose by 1 million last week, with forecasts reaching 4 million.
Goldman Sachs warned that US economic growth could shrink by 24% in the second quarter, two and a half times larger than the previous post-war record.
A series of flash polls on European and American production in March is scheduled for Tuesday and are expected to show deep falls in the recessionary territory.
Surveys from Japan have shown that its service sector has shrunk at the fastest pace recorded in March and the factory’s activity at the fastest pace in about a decade.
HIGH DOLLAR OFF
While governments around the world are launching bigger and bigger fiscal stimulus packages, the latest U.S. effort remains stuck in the Senate as Democrats said it contained too little money for hospitals and not enough limits for funding. big business.
The logjam combined with the Fed’s stimulus spray to take away some shine from the US dollar, although it remains in demand as a global liquidity buffer.
“The special role of the USD in the global financial system – it is used globally in a series of transactions such as commodity prices, issuing bonds and international bank loans – means that USD liquidity has a reward,” he said. CBA economist Joseph Capurso.
“While liquidity is an issue, the USD will remain strong.”
For now, the prospect of massive Fed dollar funding has seen the currency decline to 110.38 yen from Monday’s 111.56 monthly high.
The euro rebounded 0.8% to $ 1.0805, compared to a three-year low of $ 1.0635. The dollar index slipped 0.4% to 101.720 and out of a three-year peak of 102.99.
Currencies linked to commodities and emerging markets that suffered most during the recent divestment of the assets, also benefited from the stable hand of the Fed. The Australian dollar rose 1.5% to $ 0.5915 and away from a minimum of 17 years = $ 0.5510.
Gold rose in the wake of the Fed’s promise of even cheaper money, and rose 1.7% to $ 1,578.45 an ounce after rising from a low of $ 1,484.65 on Monday.
Oil prices also rebounded after recent wild losses, with U.S. crude oil rising by $ 1.09 to $ 24.45 barrels. Brent crude reached 97 cents to $ 28.00.