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GLOBAL MARKETS-Rout resumes as more nations self-isolate against virus

Published 03/23/2020, 05:24 PM
Updated 03/23/2020, 05:30 PM
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* World FX rates in 2020 http://tmsnrt.rs/2egbfVh
* European stocks slump 4.5%, S&P 500 futures down 3.5%
* Asia shares sink on recession fears
* Oil prices buckle nearly 5%
* Bond markets digest mass stimulus effort
*

By Marc Jones, Wayne Cole and Scott Murdoch
LONDON/SYDNEY/HONG KONG, March 23 (Reuters) - Financial
markets around the world took another hammering on Monday as a
rising tide of national coronavirus lockdowns threatened to
overwhelm policymakers' frantic efforts to cushion what is
likely to be a deep global recession.
European stocks dived 4.5% as they reopened .EU and
commodity markets also saw more heavy selling as the global
death toll from the virus passed 14,000.
Investors tried to take cover in ultra-safe government bonds
and in the Japanese yen in currency markets /FRX but with so
much 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 and in a
taste of the pain to come, E-Mini futures for the S&P 500 ESc1
dived 3.5% .N and MSCI's main world stocks index
.MIWD00000PUS was down 1.6% and almost at 4-year lows.
UBS Australian head of equities distribution George Kanaan
said global financial markets were 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.
"This is unprecedented in terms of fears and there are two
elements driving that.
"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 0.80%, having dived all the way to 0.84% on Friday from
a top of 1.28%. European benchmarks like German Bunds were at
around -0.36% 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 0.8% to $0.5749 AUD=D3 .
The U.S. dollar started firm but took a step back after
partisan battles in the U.S. Senate stopped a coronavirus
response bill from advancing. The dollar eased 0.5% to 110.31 yen JPY= while the euro
recouped losses to be up 0.1% at $1.0705 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 steady rise in the dollar undermined gold, which slipped
0.3% to $1,493.83 per ounce XAU= . GOL/
Oil prices were sharply lower. Brent crude LCOc1 futures
dropped $1.30, or 4.9%, to $25.66 a barrel, while U.S. crude
CLc1 was down 29 cent to $22.34. O/R

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Asia stock markets https://tmsnrt.rs/2zpUAr4
Asia-Pacific valuations https://tmsnrt.rs/2Dr2BQA
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