* World FX rates in 2020 http://tmsnrt.rs/2egbfVh
By Marc Jones
LONDON, March 23 (Reuters) - Fresh support announced by the
Federal Reserve failed to lift Wall Street on Monday, after
Europe and Asia had both been overwhelmed by the coronavirus
pandemic and growing number of national lockdowns that could
push the global economy deep into recession.
European stocks had dived more than 4% in morning trade
.EU , futures had been more than 3% lower and commodity markets
had also suffered more heavy selling before an announcement from
the U.S. central bank at 1200 GMT.
The Fed said it would backstop an unprecedented range of
credit for households, small and major firms to offset the
"severe disruptions" caused by the virus. Purchases of U.S.
Treasury and mortgage-backed securities will also be expanded as
much as needed. "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.
"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."
Wall Street futures had been pointing higher after the
moves, but the rally failed to materialise. The S&P 500, Dow
Jones and Nasdaq were all 0.5% in the red after the first flurry
of trades, and European bourses were down 2.5% to 3.5%.
.N .EU
Investors were still taking cover in ultra-safe government
bonds and in the Japanese yen in currency markets /FRX . The
euro EUR= also surged after the Fed's actions, but with
widespread 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 of a 1% drop in the
global economy this year, too
MSCI's main world stocks index .MIWD00000PUS was down 0.8%
and almost at four-year lows.
UBS Australian head of equities distribution George Kanaan
said global financial markets have been 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.
"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 .MIAPJ0000PUS lost 5.4%, with New Zealand's
market shedding a record 10% .NZ50 at one point as the
government closed all non-essential businesses. Shanghai blue chips .CSI300 dropped 3.3%, though Japan's
Nikkei .N225 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 US10YT=RR were
down at 0.82%, having dived all the way to 0.84% on Friday from
a top of 1.28%. European benchmarks like German Bunds were at
around -0.37% DE10YT=RR down more than 20 bps from last week's
10-month highs. GVD/EUR
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 as much as 0.8% to $0.5749
AUD=D3 .
The U.S. dollar started firm but then got sucked under by
the Fed's measures. There were also still partisan battles in
the U.S. Senate which had stopped a coronavirus response bill
from advancing. The dollar eased 0.5% to 110.31 yen JPY= while the euro
shot up 0.8% to $1.0780 having been down at from $1.0635 at one
point EUR= .
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 sudden drop in the dollar revived gold, which had
slipped 0.3% to $1,493.83 per ounce XAU= . GOL/
Oil prices also pared some of their sharp losses with Brent
crude LCOc1 futures clawing back up to $26.46 having been down
almost 5% at one point at $25.66 a barrel. O/R
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Asia stock markets https://tmsnrt.rs/2zpUAr4
Asia-Pacific valuations https://tmsnrt.rs/2Dr2BQA
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>