* S&P 500 futures bounce, Nikkei jumps
* Investors relieved as Fed pledge eases bond market stress
* Dollar off peaks on promise of bottomless liquidity
* Factory surveys show extent of economic damage
By Sujata Rao
LONDON, March 24 (Reuters) - Global equities rebounded
almost 2% on Tuesday, off near four-year lows, and the dollar
slipped as investors pinned hopes on unprecedented stimulus
steps by the U.S Federal Reserve and other policymakers to ease
strains in financial markets.
While the measures such as the Fed's offer of unlimited
bond-buying won't immediately mitigate the economic devastation
inflicted by the coronavirus outbreak, they will launch more
dollars into world markets, allowing companies, funds and banks
to access cash to pay creditors, supplier and end-investors.
The prospect had not cheered Wall Street for very long on
Monday, with losses of 2-3% on major indexes, but the mood
improved on Tuesday, possibly as many other central banks and
governments looked set to join the fray. Wall Street futures
pointed to stocks opening 4% higher ESc1 , while a pan-European
equity index also rallied a similar amount.
"Today there is a strong recovery connected to the move that
the Fed has introduced this massive weapon," said Francois
Savary, CIO of wealth manager Prime Partners, noting the Fed had
needed to resolve funding markets seize-ups as a priority.
"The key issue at the end of the day is that we need to deal
with a credit markets that is completely closed. First they
needed to stop this increase in bond yields... second, they
needed to make sure that there is a return of liquidity in the
credit then it will be equities - in that sequence."
The Fed will not only buy unlimited amounts of assets but
also expand its mandate to corporate and municipal bonds and
backstop a series of other measures that analysts estimate will
deliver $4 trillion-plus in loans to non-financial
firms. There were also signs of progress in Congress on a $2
trillion U.S. stimulus deal, which Treasury Secretary Steven
Mnuchin hoped was "very close". Other countries are unveiling their own measures - South
Korea's ravaged market climbed 8.6% .KS11 after the government
doubled a planned economic rescue package to 100 trillion won
($80 billion). In China, mainland stocks posted their biggest gain in three
weeks with a rise of almost 3% .CSI300 while Japan's Nikkei
.N225 soared 7%, its biggest daily rise since Feb 2016. .SS
.T
Not everyone was optimistic the buoyant mood would last
noting, for instance, that global coronavirus infections now top
350,000 with scores of countries in lockdown. China too posted a
rise in new infections brought in from abroad.
"Markets are continuing to bounce up on the latest policy
announcements and then sliding back down as the economic reality
of the situation re-emerges," Deutsche Bank strategist Jim Reid
said.
Still, the plan calmed nerves in bond markets, where yields
on two-year Treasuries hit their lowest since 2013. Ten-year
yields were at 0.8339%, from last week's peak of 1.28%
US10YT=RR . Yields inched higher on Tuesday as equities
rallied.
ALL ABOUT THE ECONOMY
Just how much the virus is ravaging the global economy is
evident in a series of growth forecast downgrades and advance
readings of purchasing managers indexes (PMI) across the world's
biggest economies.
German activity plunged to the lowest since the 2009 crisis,
driven by a record services contraction, while French activity
hit all-time lows. Japan posted its biggest-ever services
decline. "Economies around the world are going offline and that is
devastating for economic activity, it's creating the most robust
dislocation in financial markets in living memory," said George
Boubouras, head of research at K2 Asset Management in Melbourne.
For now however, the prospect of massive Fed funding pushed
the greenback 0.5% lower against rivals, off three-year peaks
=USD . It fell similarly to the yen JPY= and slumped 1%
versus the euro EUR= .
Commodity and emerging market currencies also benefited,
with the Australian dollar up almost 2% to $0.59315 AUD=D3 and
well off 17-year lows.
There was some relief on the market volatility front too. A
gauge of expected euro-dollar swings eased below 12%, from above
14% on Monday EUR1MO=FN , and a measure of U.S. equity
volatility slipped to one-week lows around 57 points .VIX .
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