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GLOBAL MARKETS-Stocks rally after last week's rout on central bank policy hopes

Published 03/03/2020, 01:44 AM
Updated 03/03/2020, 01:48 AM
GLOBAL MARKETS-Stocks rally after last week's rout on central bank policy hopes
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(Adds U.S. market open, byline, dateline; previous LONDON)
* Stocks rally worldwide after worst week since 2008
* U.S. Treasury yields slide toward 1%
* BOJ, BoE make soothing noises
* Oil higher on signals of supply cuts from OPEC

By Marc Jones and Herbert Lash
LONDON/NEW YORK, March 2 (Reuters) - Equity markets around
the world surged on Monday as the prospect for central banks
cutting interest rates to soften the economic blow of the
coronavirus heartened investors and drove U.S. government debt
yields to record lows.
Global factories took a beating in February from the
coronavirus, with activity in China shrinking at a record pace,
surveys showed, raising the prospect of a coordinated policy
response by central banks to prevent a global recession.
The dollar slipped to a fresh one-month low against a basket
of currencies after the Federal Reserve, Bank of Japan and Bank
of England all indicated a willingness to take action to
confront the economic fallout from the coronavirus.
The yield on the benchmark 10-year U.S. Treasury note fell
to an all-time low of 1.03% while the 10-year German bund
DE10YT=RR , the benchmark for euro zone lending, slid to a
six-month low of -0.67%.
Oil prices jumped more than 4%, reversing an early decline
to multi-year lows, as hopes of a deeper output cut by the
Organization of the Petroleum Exporting Countries and central
banks' policy measures countered fears of slower growth.
"There's a growing sense that we're going to see coordinated
action by global central banks to try to offset the slowdown
from the coronavirus," said Phil Flynn, an analyst at Price
Futures Group.
Equity markets around the world rose after suffering their
worst plunge last week since the depths of the 2008 financial
crisis.
Asian markets initially fell after China reported a record
slump in factory activity but the region rallied to finish
higher. MSCI's broadest index of world shares .MIWD00000PUS rose
for the first time in eight sessions. The index gained 1.87% and
emerging market stocks rose 1.08%.
In Europe, the broad STOXX 600 index .STOXX rose 0.09% and
stocks on Wall Street rallied more than 2%.
The Dow Jones Industrial Average .DJI rose 647.28 points,
or 2.55%, to 26,056.64. The S&P 500 .SPX gained 68.91 points,
or 2.33%, to 3,023.13 and the Nasdaq Composite .IXIC added
196.66 points, or 2.3%, to 8,764.03.
The scale of losses last week - almost $6 trillion was wiped
off world stocks - led financial markets to price in policy
responses from almost every major central bank.
Fed funds futures now imply a full 50 basis point cut by the
Fed at its March 17-18 meeting 0#FF: .
The disruption to global supply chains, factory output and
global travel caused by the coronavirus has worsened the outlook
for a world economy already struggling with the fallout of the
U.S.-China trade war.
In Paris, the Organization for Economic Cooperation and
Development (OECD) warned the outbreak could cause the worst
global downturn since the financial crisis. In a bleak scenario,
growth could drop to just 1.5%. The OECD's outlook and the likelihood for slower growth has
investors and market analysts worried the worst is yet to come.
"Nobody knows how this is going to play out," said Ed
Clissold, chief U.S. strategist at Ned Davis Research.
"There are going to be some nasty headlines in the next few
weeks about people in various countries, including the United
States, getting coronavirus," he said.
Companies will issue profit warnings and some economic data
will look scary, Clissold said, suggesting the market has not
found a bottom yet.
Ned Davis examined previous global health scares since 2002,
which registered a far lower gauge of investor sentiment, he
said. An average reading was about 13, and the coronavirus
reading is only 27, he said.
The epidemic, which began in the Chinese province of Hubei,
has killed 3,000 people worldwide as authorities race to contain
infections in Japan, Iran, Italy, South Korea and the United
States.
Gold rose after last week suffering its largest daily fall
in nearly seven years.
Spot gold prices XAU= rose $15.0679 or 0.95 percent, to
$1,599.81 an ounce.
Brent crude LCOc1 futures rose $2.37 to $52.04 a barrel.
U.S. West Texas Intermediate (WTI) crude CLc1 futures rose
$2.08 to $46.84 a barrel.
The dollar index =USD fell 0.759%, with the euro EUR= up
1.37% to $1.1176.
The Japanese yen JPY strengthened 0.21% versus the
greenback at 107.88 per dollar.
Benchmark 10-year notes US10YT=RR last rose 14/32 in price
to yield 1.0816%.


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