(Recasts throughout with updated prices, background, comment)
* U.S. stocks reverse some early losses
* Dollar surges to highest since January 2017
* ECB launches 750 billion-euro asset purchase program
* Euro STOXX 600 rises in volatile trade
* Asian stock markets : https://tmsnrt.rs/2zpUAr4
* Graphic: World FX rates in 2020 http://tmsnrt.rs/2egbfVh
By Chris Prentice and Tom Wilson
WASHINGTON/LONDON, March 19 (Reuters) - European and U.S.
stocks climbed on Thursday, recovering from earlier losses, in a
sign of tentatively more stable markets, as central banks across
the world moved to stem a coronavirus-induced financial rout in
moves that boosted bonds and provide more access to the dollar.
The U.S. Federal Reserve opened the taps for central banks
in nine countries to increase the availability of dollars for
contracts made in the U.S. currency in hopes of loosening
particularly tight bond markets. The Fed said the swaps, in which the U.S. central bank
accepts other currencies as collateral in exchange for dollars,
will be in place for at least the next six months.
The swaps will allow the central banks of Australia, Brazil,
South Korea, Mexico, Singapore, Sweden, Denmark, Norway and New
Zealand to tap a combined total of up to $450 billion to help
ensure the world's dollar-dependent financial system functions.
The collateral to purchase crude oil, for example, is U.S.
Treasury debt and to buy those securities requires dollars, said
Michael Skordeles, U.S. macro strategist at Truist/Suntrust
Advisory Services in Atlanta.
"All these things kind of happening at once causes a lot of
dominoes to fall, and as the dominoes fall, it creates more
demand, pushing people toward the dollar," Skordeles said.
"This (the dollar swap lines) is going to help, but it's not
a silver bullet," he said. "Because there's a flow of capital
into dollar-denominated assets, in particular U.S. Treasuries,
it's starving these countries of liquidity and making the dollar
appreciate."
The Mexican peso MXN= has slumped about 30% against the
dollar since a month ago, when Wall Street began to slide by
about the same amount on pandemic fears.
On Wall Street, the Dow Jones Industrial Average .DJI rose
383.61 points, or 1.93%, to 20,282.53, the S&P 500 .SPX gained
34.05 points, or 1.42%, to 2,432.15 and the Nasdaq Composite
.IXIC added 229.81 points, or 3.29%, to 7,219.66.
MSCI's world equity index .MIWD00000PUS gained 0.09%.
The stock market meltdown, triggered by worries over the
coronavirus outbreak, has pushed Wall Street's three main
indexes down about 30% from their record closing highs last
month and has almost erased the Dow Industrials' .DJI gains
since U.S. President Donald Trump's 2017 inauguration.
The dollar rose against a basket of six major currencies,
striking a more than three-year high .DXY , as investors rushed
to secure liquidity.
The British pound GBP=D3 climbed, reversing after slipping
past the previous day's trough to the lowest since 1985.
Bond markets stabilized somewhat after the European Central
Bank pledged late Wednesday to buy 750 billion euros ($820
billion) in sovereign debt through 2020. That brought the ECB's planned purchases for this year to
1.1 trillion euro, with the new purchases alone worth 6% of the
euro zone's GDP. Government bond yields in Italy and across the euro zone
dropped after the ECB's emergency measures, though European
stocks fell back into negative territory after arresting their
rout in early trading.
Expected price swings for some of the world's biggest
currencies rocketed to multi-year highs as the demand for
dollars forced traders to dump currencies across the board.
For the British pound versus the dollar, expected volatility
gauges leapt to 24.4%, their highest level since before the 2016
Brexit vote. "One unresolved and really critical issue is what's going on
in volatility," said Andrew Sheets, chief cross-asset strategist
at Morgan Stanley. "I think that volatility needs to stabilise
before the broader market can heal."
ITALIAN YIELDS FALL
Italy, which has seen its borrowing costs jump in recent
days, led the drop in yields after the ECB move.
Its two-year bond yields slumped by than 100 basis points to
0.41% IT2YT=RR , heading for their biggest one-day fall since
1996. Italy's 10-year bond yields slid as much as 90 bps to
1.40% IT10YT=RR .
The gap over the safer German Bund's yields tightened almost
100 bps from Wednesday's closing levels and were set for the
biggest daily drop since the 2011 euro one crisis.
Markets elsewhere failed to respond to central bank action.
Before the ECB move, the U.S. Federal Reserve promised a
liquidity facility for money market mutual funds and the Bank of
Japan made two unscheduled bond purchases totalling 1.3 trillion
yen ($12 billion).
The Australian central bank slashed interest rates to a
record low of 0.25%.
Traders reported huge strains in bond markets, however, as
distressed funds sold any liquid asset to cover losses in stocks
and redemptions from investors. Benchmark 10-year sovereign bond yields in New Zealand,
Malaysia, Korea, Singapore and Thailand surged as prices fell,
and U.S. 10 year Treasuries US10YT=RR rose 10 basis points
through the session.
The coronavirus pandemic has killed almost 9,000 people
globally, infected more than 218,000 and prompted widespread
emergency lockdowns.
Gold XAU= dropped 0.31%, and like other assets was
buffeted by volatility. Copper hit its down-limit in Shanghai,
and benchmark futures traded in London CMCU3 fell to their
weakest in over four years. MET/L
Oil jumped after an overnight plunge to an 18-year low in
Asian trade, though coronavirus fears capped gains. Brent
LCOc1 surged nearly 8% to $26.82. For Reuters Live Markets blog on European and UK stock
markets, please click on: LIVE/
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Equities and bonds total return https://tmsnrt.rs/3deypWu
Emerging market currencies sink https://tmsnrt.rs/39YjsWG
Powerful central bank action helps stem bond market drubbing
plunges to three-year lows as dollar demand jumps
down in choppy session as investors puzzle out
policy shares back in red as stimulus floor proves to be
fleeting hits 3-1/2-year low as panic outweighs stimulus; REITs
collapse MARKETS-Romania's central bank halts leu slide, forint hits
new low STOCKS-Most Gulf stocks end higher on stimulus, oil
prices FX DEBT-Canadian dollar bounces off 4-year low as oil
rallies Asia Stocks-Philippines sees worst day ever, others lose on
coronavirus fears slips as coronavirus-led cash hunt eclipses
stimulus measures up after three-day plunge but coronavirus curbs gains
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