* Asian stock markets : https://tmsnrt.rs/2zpUAr4
* Oil crashes more than 20% as Saudi Arabia cuts prices
* Nikkei sinks more than 5%, S&P 500 futures down 4.9%
* Fed funds fully price for 75 bps cut in March, chance of
100 bps
* 30-year Treasury yields drop below 1%, drag dollar down
* Yen surges as Russian rouble, Mexican peso in free-fall
By Wayne Cole
SYDNEY, March 9 (Reuters) - Global share markets tumbled on
Monday as panicked investors fled to bonds to hedge the economic
shock of the coronavirus, and oil plunged more than 20% after
Saudi Arabia slashed its official selling price. Investors drove 30-year U.S. bond yields beneath 1% as they
wagered the Federal Reserve would be forced to cut interest
rates by at least 75 basis points at its March 18 meeting,
despite only just having delivered an emergency easing.
The safe-haven yen surged across the board as emerging
market currencies with exposure to oil, including the Russian
rouble and Mexican peso, tumbled.
Saudi Arabia had stunned markets with plans to raise its
production significantly after the collapse of OPEC's supply cut
agreement with Russia, a grab for market share reminiscent of a
drive in 2014 that sent prices down by about two thirds. O/R
Brent crude LCOc1 futures slid $11.14 to $34.13 a barrel
in chaotic trade, while U.S. crude CLc1 shed $10.58 to $30.70.
"Today's price action puts at risk the fiscal health of the
vast majority of sovereign producers and budget cuts and
increased debt loads are now looming in the event of a prolonged
period of low prices," warned Helima Croft, head of global
commodity strategy at RBC Capital Markets.
"For the most politically and economically fragile producer
states, the reckoning could be severe."
There were also worries that U.S. oil producers that had
issued a lot of debt would be made uneconomic by the price drop.
Energy stocks took a beating and E-Mini futures for the S&P
500 ESc1 dived 4.89% to be limit down. EUROSTOXXX 50 futures
STXEc1 fell 5.7% and FTSE futures FFIc1 6.9%. .N
Japan's Nikkei .N225 fell 5.7% and Australia's
commodity-heavy market .AXJO 5.9%.
MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS lost 3.7% in its worst day since late 2015,
while Shanghai blue chips .CSI300 dropped 2.2%.
Not helping the mood was news North Korea had fired three
projectiles off its eastern coast on Monday. "The scale of the collapse shows that any hopes of a
temporary respite were in vain," said Sean Callow, a senior FX
strategist at Westpac. "The notion that overweight equities is
the only real option in a world of super-low rates now seems to
be from 'The Time Before'.
"U.S. officials have barely moved beyond platitudes about
'strong fundamentals' so there is surely plenty more room for
markets to price in major damage to the economy." The number of people infected with the coronavirus topped
107,000 across the world as the outbreak reached more countries
and caused more economic carnage. Italy's markets are sure to come under fire after the
government ordered a lockdown of large parts of the north of the
country, including the financial capital Milan. "After a week when the stockpiling of bonds, credit
protection and toilet paper became a thing, let's hope we start
to see some more clarity on the reaction," said Martin Whetton,
head of bond & rates strategy at CBA.
"Dollar bloc central banks cut policy rates by 125 basis
points, not as a way to stop a viral pandemic, but to stem a
fear pandemic," he added, while noting many had little scope to
ease further.
BOND BUBBLE
A seismic shift saw markets 0#FF: fully price in an easing
of 75 basis points from the Fed on March 18, while a cut to near
zero was now seen as likely by April.
The European Central Bank meets on Thursday and will be
under intense pressure to act, but rates there are already
deeply negative. "The onus is falling, perhaps inevitably on the actions of
governments to abandon budget surpluses and reinvigorate the
demand side of the economy," said Whetton.
Urgent action was clearly needed with data suggesting the
global economy toppled into recession this quarter. Figures out
from China over the weekend showed exports fell 17.2% in
January-February, from a year earlier. Analysts at BofA Global Research estimated the latest
sell-off had seen $9 trillion in global equity value vaporised
in nine days, while the average 10-year yield in the developed
world hit 16 basis points, the lowest in 120 years.
"The clearest outcome of the exogenous COVID-19 shock is a
collapse in bond yields, which once panic fades can induce huge
rotation to 'growth stocks' and 'bond proxies' in equities,"
they wrote in a client note.
Yields on 10-year U.S. Treasuries US10YT=RR plunged to a
once-unthinkable 0.48%, having halved in just three sessions.
Yields on the 30-year long bond US30YT=RR dived 35 basis
points on Friday alone, the largest daily drop since the 1987
crash, and slid under 1% on Monday to reach 0.96%.
The fall in yields and Fed rate expectations has pulled the
rug out from under the dollar, sending it crashing to the
largest weekly loss in four years =USD . USD/
The dollar extended its slide in Asia to as far as 101.60
yen JPY= , depths not seen since late 2016. It was last down
3.1% at 101.97 in wild trade. The euro likewise shot to the
highest in over 13 months at $1.1492 EUR= .
Gold jumped 1.6% to clear $1,700 per ounce XAU= and reach
a fresh seven-year peak. GOL/
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Asia stock markets https://tmsnrt.rs/2zpUAr4
Asia-Pacific valuations https://tmsnrt.rs/2Dr2BQA
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(Editing by Diane Craft, Sam Holmes and Jane Wardell)