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GLOBAL MARKETS-Stocks drop as virus recovery begins to look distant

Published 05/14/2020, 01:21 PM
Updated 05/14/2020, 01:30 PM
© Reuters.
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* The path ahead is uncertain - Fed Chair Powell
* The virus may never go away - WHO
* Hang Seng -1%, dollar up, gold hits 1-week peak
* Asian stock markets: https://tmsnrt.rs/2zpUAr4

By Tom Westbrook
SINGAPORE, May 14 (Reuters) - Stock markets fell and bonds
were in demand on Thursday as worries grew about a second wave
of coronavirus infections and a dour assessment from the head of
the U.S. Federal Reserve dashed hopes for a quick economic
recovery.
"The path ahead is both highly uncertain and subject to
significant downside risks," Fed Chair Jerome Powell said in a
webcast speech. He warned of a recession worse than any since World War Two,
and called for additional fiscal spending to stem the fallout
from the pandemic - a pointed comment from a central banker who
has avoided giving advice to elected officials. New outbreaks in South Korea and China were cause for
concern, even as more countries begin to re-open their economies
after lengthy lockdowns.
European stock futures were down, and every market in Asia
fell. Bonds and the dollar held ground won overnight.
FTSE futures FFIc1 and EuroSTOXX 50 futures STXEc1
dropped about 0.5%, while futures for the S&P 500 ESc1
struggled to lift much above flat.
MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS fell 1%.
"We don't think the market is going to re-test the lows, but
it's probably seen its best also, so I'm expecting a
correction," said Tony Huntley, chief investment officer at
Melbourne-based fund manager Adansonia Capital.
"The issue is whether we get a second wave (of infections)
... that would be my greatest fear."
China has re-imposed movement restrictions near its borders
with North Korea and Russia after a new outbreak was detected
there and South Korea is working to contain an outbreak centred
around bars and nightclubs in Seoul. "It is important to put this on the table: this virus may
become just another endemic virus in our communities, and this
virus may never go away," WHO emergencies expert Mike Ryan told
an online briefing on Wednesday. Bonds and the dollar rallied after Powell talked down the
prospect of negative interest rates in the United States, and
extended gains on Thursday. Yields on benchmark U.S. 10-year
Treasuries US10YT=RR fell slightly to 0.6395%. US/
A surprise drawdown of U.S. inventories helped oil prices
make meagre gains, but the bleak outlook capped rises. O/R
Gold pulled back from a one-week high hit early in the Asian
session, but held comfortably above $1,700 an ounce at
$1,711.20. GOL/
Markets are looking ahead to the release of the European
Central Bank's latest economic bulletin at 0800 GMT and the
latest U.S. jobless claims data at 1230 GMT.

SLOW GOING
Equity markets have wavered since April's rally as investors
and authorities try to weigh the risks of re-starting economies
quickly against the financial ruin that lockdowns have wrought,
while worrying about a flare-up infections.
Australian jobless data bought the latest sign of doom, with
a record plunge in employment dragging the currency to a
one-week low of $0.6420. Already bleak expectations and strong demand for Aussie
bonds kept it from steeper falls. AUD/
In the United States, the Trump Administration is pressing
on with re-opening plans despite urgings of caution from medical
experts.
"We're going to slowly open the economy," U.S. Treasury
Secretary Steven Mnuchin told Fox News on Wednesday.
"But there is also a risk that we wait too long, there is a
risk of destroying the U.S. economy and the health impact that
that creates."
Caution is also prevailing in Europe and the Antipodes,
where restrictions are beginning to relax.
"Global markets are still licking their wounds, and while
equities remain robust, gains are slowing," said Societe General
FX strategist Olivier Korber.
"A second pandemic wave is unfortunately not a tail risk, so
the full extent of the economic damage may be underestimated,"
he said, recommending a long position in euro/kiwi EURNZD=
which has gained nearly 9% this year as market volatility has
increased.
Elsewhere a strong greenback pushed the kiwi NZD=D3 to a
three-week low of $0.5968 and had the euro and pound under
pressure. FRX/
Brent crude LCOc1 firmed slightly to $29.36 per barrel and
U.S. crude CLc1 was up 1% at $25.58 per barrel.

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Global assets http://tmsnrt.rs/2jvdmXl
Global currencies vs. dollar http://tmsnrt.rs/2egbfVh
Emerging markets http://tmsnrt.rs/2ihRugV
MSCI All Country Wolrd Index Market Cap http://tmsnrt.rs/2EmTD6j
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