GLOBAL MARKETS-Asia shares edge up, China factories show flicker of life

* Asian stock markets : tmsnrt.rs/2zpUAr4

* Asia shares supported by month-end demand, calmer mood

* China factory survey beats forecasts, PMI rises to 52.0

* Oil prices steady for now after steep drop

By Wayne Cole

SYDNEY, March 31 (Reuters) – Asian shares managed a tentative rally on Tuesday as factory data from China held out the hope of a rebound in activity even as other countries across the globe all but shut down.

China’s official manufacturing purchasing managers’ index (PMI) bounced to 52.0 in March, up from a record-low 35.7 in February and topping forecasts of 45.0.

Analysts cautioned the index could overstate the true improvement as it measures the net balance of firms reporting an expansion or contraction in activity.

If a company merely resumed working after a forced stoppage, it would read as an expansion without saying much about the overall level of activity.

Still, the headline number was a relief and helped MSCI’s broadest index of Asia-Pacific shares outside Japan rise 1.1%.

Japan’s Nikkei firmed 1.0% after a jittery start, while South Korea added 2%.

E-Mini futures for the S&P 500 added another 0.6%, supported by talk of book-keeping demand.

“It’s month-end rebalancing, whereby balanced funds now underweight equities versus fixed income given this month’s valuation destruction, need to buy stocks to get back into balance,” analysts at NAB said.

Healthcare had led Wall Street higher, with the Dow ending Monday up 3.19%, while the S&P 500 gained 3.35% and the Nasdaq 3.62%.

News on the coronavirus remained grim but radical stimulus steps by governments and central banks have at least provided some comfort to economies.

Infections in hard-hit Italy slowed a little, but the government still extended its lockdown to mid-April. California reported a steep rise in people being hospitalised, while Washington state told people to stay at home.

Trade ministers from the Group of 20 major economies agreed on Monday to keep their markets open and ensure the flow of vital medical supplies.

OIL PRICES OVERWHELMED

Portfolio management also played a part in the forex market where many fund managers found themselves over-hedged on their U.S. equity holdings given the sharp fall in values seen this month, leading them to buy back dollars.

That saw the euro ease back to $1.1020, from a top of $1.143 on Monday, while the dollar index bounced to 99.330, from a trough of 98.330.

Month-end demand for dollars from Japanese funds saw the dollar inch up to 108.45 yen, though it remained some way from last week’s peak at 111.71.

Oil prices plunged to the lowest in almost 18 years on Monday as lockdowns for the virus squeezed demand even as Saudi Arabia and Russia vied to pump more product.

In a new twist, U.S. President Donald Trump and Russian President Vladimir Putin agreed during a phone call on Monday to have their top energy officials meet to discuss slumping prices.

“However, the reality is that the level damage to demand is likely to overwhelm any production cut agreement between major producers,” wrote analysts at ANZ in a note.

“The lockdown of cities around the world and the shutdown of the aviation industry will cause a fall in demand the industry has never seen before.”

Prices did at least try and steady early Tuesday, with U.S. crude up 56 cents to $20.64. Brent crude futures gained 19 cents to $22.95 a barrel.

In the gold market all the talk has been of a rush of demand for the physical product amid shortages in coins and small bars. Flows into gold-backed ETFs have ballooned by $13 billion so far this year, the most since 2004.

The metal was holding at $1,615 an ounce, well up from a low of $1,450 touched early in the month.

Source: Read Full Article

Oil plunges to 2002 lows, shares sink again

LONDON/SYDNEY (Reuters) – Oil took another eyewatering 8% tumble on Monday and world shares buckled again as fears mounted that the global coronavirus shutdown could last for months.

There were some bright spots, with Australian equities posting a standout jump as the government launched a super-sized support programme, but that was about it.

Japan’s Nikkei had led the rest of Asia lower and Europe’s main markets slumped by 1.5-2.5% in early trade, adding to what has already been the region’s worst quarter since 1987.

The rout in oil took crude to its lowest since 2002. Brent was at only $22 a barrel by 0815 GMT, hammering petro currencies such as Russia’s rouble, Mexico’s peso and the Indonesian rupiah by as much as 2%.

It didn’t help that the U.S. dollar was back on the climb. The euro and pound were both batted back by about 0.6%, leaving the former near $1.1070 and sterling at $1.2350. On Friday Britain had become the first major economy to have its credit rating cut because of the coronavirus.

“I have been in this business almost 30 years and this is the fastest correction I have seen,” Lombard Odier’s Chief Investment Officer Stephane Monier said of this year’s plunge in global markets.

Wall Street futures had also backpeddled into the red, having been up as much as 1% in Asia after a late flutter of optimism.

Australia’s benchmark ASX200 registered a late surge, closing 7% up after Prime Minister Scott Morrison unveiled a $130 billion ($79.86 billion) package to help to save jobs.

Most other markets were down but trimmed earlier losses. Japan’s Nikkei dropped 1.6%, Shanghai blue chips were down 0.9% and there were sharper drops in Southeast Asia, with Singapore’ benchmark index down almost 3%.

JPMorgan now predicts that global GDP could contract at a 10.5% annualised rate in the first half of the year.

“We continue to mark down 1H20 global GDP forecasts as our assessment of both the global pandemic’s reach and the damage related to necessary containment policies,” said JPMorgan economist Bruce Kasman.

As a result, central banks have mounted an all-out effort to bolster activity with rate cuts and massive asset-buying campaigns, which have at least eased liquidity strains in markets.

China on Monday became the latest to add stimulus, with a cut of 20 basis points to a key repo rate, the largest in nearly five years.

Singapore also eased as the city state’s bellwether economy braced for a deep recession while New Zealand’s central bank said it would take corporate debt as collateral for loans.

Rodrigo Catril, a senior FX strategist at NAB, said the main question for markets was whether all the stimulus would be enough to help the global economy withstand the shock.

“To answer this question, one needs to know the magnitude of the containment measures and for how long they will be implemented,” he added.

“This is the big unknown and it suggests markets are likely to remain volatile until this uncertainty is resolved.”

DOLLAR NOT DONE YET

Bond investors looked to be bracing for a long haul, with European government bond yields dipping and those at the very short end of the U.S. Treasury curve turning negative. Those on 10-year notes dropped a steep 26 basis points last week and were last standing at 0.68%.

That drop has combined with efforts by the Federal Reserve to pump more U.S. dollars into markets, dragging the currency off recent highs.

Against the yen, the dollar was pinned at 107.74, well off the recent high of 111.71, but its gains against the euro, pound and heavyweight emerging market currencies suggested it was regaining strength.

“Ultimately, we expect the USD will soon reassert itself as one of the strongest currencies,” argued analysts at CBA, noting the dollar’s role as the world’s reserve currency made it a countercyclical hedge for investors.

“This means the dollar can rise because of the deteriorating global economic outlook, irrespective of the high likelihood the U.S. is also in recession.”

The dollar’s retreat had provided a fillip for gold, but buying stalled as investors were forced to liquidate profitable positions to cover losses elsewhere. The metal was last at $1,613.6 an ounce.

Oil prices have also been hit by a fight for market share between Saudi Arabia and Russia, with neither showing signs of backing down even as global transport restrictions hammer demand.

Brent futures were down 8%, or $2, at $22.50 a barrel – their lowest for 18 years. U.S. West Texas Intermediate (WTI) crude futures fell as far as $19.92, near a 2002 low hit this month.

“Central banks have been easing (monetary policy) and governments have been offering stimulus packages, but they are only supportive measures, not radical treatments,” said Satoru Yoshida, a commodity analyst with Rakuten Securities.

Source: Read Full Article

Asia shares suffer virus chills, central banks offer what they can

SYDNEY (Reuters) – Asian shares slid on Monday and oil prices took another tumble as fears mounted that the global shutdown for the coronavirus could last for months, doing untold harm to economies despite central banks’ best efforts.

“We continue to mark down 1H20 global GDP forecasts as our assessment of both the global pandemic’s reach and the damage related to necessary containment policies has increased,” said JPMorgan economist Bruce Kasman.

They now predict global GDP could fall at a 10.5% annualized rate in the first half of the year.

There was much uncertainty about whether funds would have to buy or sell for month- and quarter-end to meet their benchmarks, many of which would have been thrown out of whack by the wild market swings seen over March.

E-Mini futures for the S&P 500 skidded 1.2% right from the bell, and Japan’s Nikkei 3.7%. EUROSTOXXX 50 futures fell 0.6% and FTSE futures 1.3%.

MSCI’s broadest index of Asia-Pacific shares outside Japan lost 1.1%, while Shanghai blue chips shed 1.4%.

Central banks have mounted an all-out effort to bolster activity with rate cuts and massive asset-buying campaigns, which have at least eased liquidity strains in markets.

China on Monday became the latest to add stimulus with a cut of 20 basis points in a key repo rate.

Singapore also eased as the city-state’s bellwether economy braced for a deep recession, while New Zealand’s central bank said it would take corporate debt as collateral for loans.

Rodrigo Catril, a senior FX strategist at NAB, said the main question for markets was whether all the stimulus would be enough to help the global economy withstand the shock.

“To answer this question, one needs to know the magnitude of the containment measures and for how long they will be implemented,” he added. “This is the big unknown and it suggests markets are likely to remain volatile until this uncertainty is resolved.”

It was not encouraging, then, that British authorities were warning lockdown measures could last months.

U.S. President Donald Trump on Sunday extended guidelines for social restrictions to April 30, despite earlier talking about reopening the economy for Easter.

Japan on Monday expanded its entry ban to include citizens traveling from the United States, China, South Korea and most of Europe.

DOLLAR NOT DONE YET

Bond investors looked to be bracing for a long haul with yields at the very short end of the Treasury curve turning negative and those on 10-year notes dropping a steep 26 basis points last week to last stand at 0.65%.

That drop has combined with efforts by the Federal Reserve to pump more U.S. dollars into markets, and dragged the currency off recent highs.

Indeed, the dollar suffered its biggest weekly decline in more than a decade last week. [USD/]

Against the yen, the dollar was pinned at 107.27, well off the recent high at 111.71. The euro edged back to $1.1096, after rallying more than 4% last week.

“Ultimately, we expect the USD will soon reassert itself as one of the strongest currencies,” argued analysts at CBA, noting the dollar’s role as the world’s reserve currency made it a countercyclical hedge for investors.

“This means the dollar can rise because of the deteriorating global economic outlook, irrespective of the high likelihood the U.S. is also in recession.”

The dollar’s retreat had provided a fillip for gold, but fresh selling emerged on Monday as investors were forced to liquidate profitable positions to cover losses elsewhere. The metal was last off 0.5% at $1,609.42 an ounce.

Oil prices were again under water as Saudi Arabia and Russia show no signs of backing down in their price war.

Brent crude futures lost $1.56 to $23.37 a barrel, while U.S. crude fell $1.12 to $20.39.

Source: Read Full Article

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.

Source: Read Full Article

Stocks rebound grinds past 10% after $2 trillion U.S. stimulus boost

LONDON (Reuters) – A breakneck rebound in world stocks made it past the 10% mark on Wednesday before more global coronavirus warnings and fresh turbulence in commodity markets saw things grind to a halt.

Hopes that an incoming $2 trillion U.S. fiscal stimulus will ease the economic devastation caused by virus lockdowns gave world equity indexes .MIWD00000PUS their first back-to-back gains in a month, though wasn’t plain sailing.

Europe’s main markets in London, Frankfurt and Paris were struggling to stay positive after tearing 4%-5% higher and oil prices swung from 3% up to 3% down, while Wall Street looked set to open lower after Tuesday’s stellar surge.

The Dow Jones Industrial Average .DJI had soared over 11% in its biggest one-day percentage gain since 1933 and the S&P 500 scored a 9.4% jump – its tenth best day on record out of 24,067 trading sessions since daily data started in 1927.

“The right steps have been taken but the main thing that is driving the market at the moment is sentiment,” said Chris Dyer, Director of Global Equity at fund manager Eaton Vance.

He said it was now vital to see some positive signs on combating the epidemic and that health systems were not being overwhelmed. “Market direction can change very, very quickly depending on one item of news or one development,” he added.

The U.S. stimulus deal is expected to include $500 billion in direct payments to people and $500 billion in liquidity assistance.

President Donald Trump had also pressed his case for a re-opening of the U.S. economy by mid-April, though that met with immediate scepticism given the rise in infections in the United States is now among the biggest in the world.

In particular, its financial hub of New York City suffered another big increase, fuelling worries about a shortage of hospital beds.

In Europe too, there were more high-profile cases including Britain’s Prince of Wales, while an internal EU document seen by Reuters showed the bloc needs 10 times more protective equipment and devices like ventilators than traditional supply chains can provide.

“Global equities are clearly a better value proposition than they were a month ago, but we would exercise caution against value opportunities becoming value traps,” said Tim Graf, head of Macro Strategy EMEA at State Street Global Markets.

“Bull markets do not typically begin with 10 percent rallies in a single day, even if the policy response to this crisis has been more expansive and powerful than any previously offered.”

DOLLAR DE-STRESS

In the U.S., the benchmark S&P 500 is still nearly $8 trillion below its mid-February high, and investors expect more sharp swings. Wall Street’s fear gauge eased overnight but was on the rise again ahead of Wednesday’s open.

In the currency markets, the dollar slipped for a third straight session as the scramble for liquidity was soothed by the super-sized U.S. stimulus plan, though it was starting to look a little stronger again.

The risk-sensitive Australian dollar AUD=D3 jumped over the 60-U.S. cent mark for the first time in a week and the euro traded up 0.3% past $1.0835 EUR= and, with traders moving gradually away from safety boltholes, the Japanese yen eased to 111.34 yen per dollar JPY= to leave it just off a one-month low.

Bond markets were also calmer. Benchmark U.S. Treasuries were yielding 0.86% while in Europe Germany’s 10-year yield DE10YT=RR edged a basis point higher to -0.31%, tailed by other higher-rated government debt. NL10YT=RR, AT10YT=RR

In Italy, the epicenter of the virus in Europe, 10-year borrowing costs were unchanged at 1.59%; nearly half last week’s high of 3.01% IT10YT=RR.

European Central Bank chief Christine Lagarde asked euro zone finance ministers during a videoconference on Tuesday evening to seriously consider a one-off joint debt issue of “coronabonds”, officials also told Reuters.

In metals markets, gold changed hands at $1,610.0 per ounce XAU=, retaining most of Tuesday’s gains of almost 5%, its biggest jump since 2008.

Oil prices buckled though another 3% as concerns about demand took over again. [O/R]

Brent crude futures LCOc1 pinballed from $27.51 per barrel to $26.22. That is up about $4, or 12%, from their 18-year intraday low on Friday, though on the month the market is down over 45%.

Source: Read Full Article