Stocks bounce after taking worst hit since 1987 crash

Andrew Cummings
March 17, 2020

United States stock futures rose by their daily limit in Asian trading, also driven in part by hopes for big USA fiscal spending.

USA stocks were savaged as huge swathes of the economy come closer to shutting down due to the coronavirus outbreak, from airlines to restaurants.

The dollar recouped some lost ground against the safe-haven Japanese yen. Oil gave up attempted gains after Brent's drop below US$30 a barrel on Monday.

Some analysts are concerned that the US Federal Reserve may have reached the limits of its power to fend off recession as the coronavirus spreads. "But we are not sure".

Tuesday's stabilisation saw Australian shares close 5.9 per cent higher, their biggest daily percentage gain since October 2008, after plunging almost 10 per cent on Monday.

The Shanghai Composite Index declined 3.4% to 2,789.25 after the government reported retail sales fell 20.5% from a year ago in January and February after shopping malls and other businesses were closed.

The Nikkei 225 in Tokyo sank to 17,002.04 while Seoul's Kospi lost 3.2% to 1,714.86.

United States stock futures rose 1.16% early in Asian trading, but these gains were not enough to ease investor concern about the continuous spread of the flu-like virus. The wide range of possible outcomes has Wall Street swinging wildly, and the S&P 500 had its third straight day where it moved more than 9% - two down and one up. The S&P 500 lost 177.67 points, or 6.55pc, to 2,533.35 and the Nasdaq Composite dropped 519.56 points, or 6.6%, to 7,355.32.nearly nothing was left unscathed. The benchmark index slid as much as 11.4% early in the session, shedding about $2 trillion in market value, before bargain-hunting helped the main indexes claw back some losses.

"The move in U.S. stock futures prompted some buying of battered down shares and lifted dollar/yen", said Junichi Ishikawa, senior FX strategist at IG Securities in Tokyo.

"The focus is shifting to the fiscal response to the virus".

No prisoners were taken as Asian, European and USA markets experienced gut-wrenching declines amid the explosion of risk aversion.

DBS Group Research on Tuesday cut its target prices for OCBC and UOB on heightened credit costs and margin pressures amid the Covid-19 outbreak, following the US Federal Reserve's largest rate cut since 2008's Global Financial Crisis.

The automatic circuit-breaker was driven by mounting fears the coronavirus outbreak is having on the global economy. Markets want to see public health progress as well as fiscal stimulus. "So I think this has to be done, but it's understandable the way the market is reacting".

The Philippine Stock Exchange said trade was suspended until further notice "to ensure the safety of employees and traders", amid a broader national lockdown. Factory output declined by a record 13.5% after the Lunar New Year holiday was extended to keep manufacturing workers at home.

Markets are becoming increasingly concerned that central banks are running out of precious ammunition to counter the coronavirus pandemic, with investors clearly adopting a "sell what you can mentality".

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