Wednesday, March 11, 2020

Asia Times: Global stocks rebound on possible US stimulus, but details remain in question

Tags
  • Dollar
  • Gold
  • Yen
  • Stocks
  • Oil

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Market Recap: Global stocks rebound on possible US stimulus, but details remain in question

Wall Street rebounded on Tuesday, starting the trading session more than 2% higher after US President Donald Trump on Monday signalled that an economic stimulus from his administration is incoming to support businesses affected by the coronavirus outbreak. But early gains faded early into Tuesday's trading session as uncertainty on the details of the stimulus set into markets. Trump later surprised investors during the day after announcing that the White House will be providing aid to cruise lines and airlines as a result of the virus outbreak. The announcement helped major indices revive its momentum to gain almost 5% at the end of the trading day. The technology sector led S&P500 sectors in gains, followed close by the financial sector, rising 6.44% and 6.40% respectively.

Indexes Daily Change (%) Net Change Closing Price
Dow Jones +4.89% +1,167.14 25,018.16
S&P500 +4.94% +135.67 2,882.23
Nasdaq +4.95% +393.58 8,344.25
*Source: Bloomberg

The dollar rebounded as well, strengthening against major currencies to recover from a 2.22% decline over last week. In the EU, employment change and GDP figures were revised slightly higher to +1.1% and +1.0% YoY for 4Q 2019, although the revision had little effect on currency traders as the focus continues to remain on the rapid spread of the coronavirus.

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Investors switched back to risk-on strategies on Tuesday, pushing safe haven assets to suffer a downside correction. Gold fell back to below 1,650's level while the yen erased all of its gains from Monday's surge. In the fixed income market, US Treasuries fell back down allowing yields to recover from an all-time low. Benchmark 10-year yields spiked 26.2bps to 0.80% as a result.

Indexes Daily Change (%) Net Change Closing Price
Dow Jones +4.89% +1,167.14 25,018.16
S&P500 +4.94% +135.67 2,882.23
Nasdaq +4.95% +393.58 8,344.25
*Source: Bloomberg
US Treasury yields Daily Change (bps) Yield (%)
2-Year +15.3 0.53%
10-Year +26.2 0.80%
30-Year +28.5 1.28%
*Source: Bloomberg

Crude oil futures rebounded on Tuesday as well, likely as Russia signalled their willingness to carry on to cooperate with other OPEC+ members. Brent advanced 8.32% while WTI surged 10.38% on Tuesday thanks to the news. The outlook for oil remains volatile however, especially as Saudi Arabia pledged to increase production by 25% in April. US shale oil producers will more than likely suffer amid the oil price war between Russia and Saudi Arabia, adding to the pressure on the US economy.

Oil Futures Daily Change (%) Net Change Closing Price
Brent Crude +8.32% +2.86 37.22
WTI Crude +10.38% +3.23 34.36
*Source: Bloomberg

Elsewhere, Asia stocks may trade flat relative to the past few days, as volatility in the financial markets slightly normalises. But risks continue to skew to the downside for Asia, after Trump failed to appear at a White House briefing on the coronavirus outbreak. The Nikkei will face pressure from a likely recovery in the yen after Tuesday's sharp decline. US equity futures tracking major indices were down more than 1.5% as of 8.50am (GMT+8), signalling that more correction in financial markets may be due if the expected stimulus package from the White House takes too long to materialise or is less-than-expected.

Asia Daily Change (%) Net Change Last Price As of (GMT +8)
Nikkei Index -0.05% -10.27 19,856.85 8:40:15 AM
KOSPI Index -0.49% -9.56 1,953.37 9:00:10 AM
ASX200 Index -1.60% -95.25 5,844.40 9:00:05 AM
*Source: Bloomberg
US Futures Daily Change (%) Net Change Last Price As of (GMT +8)
Dow Futures -1.84% -458.00 24,395.00 8:50:42 AM
S&P500 Futures -2.02% -57.75 2,808.00 8:50:45 AM
Nasdaq Futures -2.04% -169.75 8,161.75 8:50:45 AM
*Source: Bloomberg

Economic releases for the day ahead include (all timings in GMT +8):

  • UK Jan GDP (5.30pm)
  • UK Jan Manufacturing & Industrial Production (5.30pm)
  • UK 2020 Fiscal Budget (7.30pm)
  • US Feb Inflation Rate (CPI) (8.30pm)