Asia-Pacific stocks rallied after the US central bank vowed to buy whatever amount of government bonds necessary to shield the economy from the impact of the coronavirus pandemic.
However, investors were sceptical that the Federal Reserve’s pledge to buy an infinite quantity of treasuries would lead to a sustained rebound for battered global markets, pointing to few signs the Covid-19 outbreak is slowing and a $2tn US fiscal package still stalled in Congress.
“This is the Fed’s ‘whatever it takes’ moment,” wrote analysts at Invesco, referring to then-European Central Bank governor Mario Draghi’s 2012 pledge to save the euro. That was, they noted, “one of the most aggressive monetary easing programmes in the history of central banking”.
In Asian trading on Tuesday Japan’s benchmark Topix index closed 3.2 per cent higher and Australia’s S&P/ASX 200 ended up 4.2 per cent. South Korea’s Kospi gained 8.2 per cent while China’s CSI 300 and Hong Kong’s Hang Seng added 2.2 per cent and 4.3 per cent, respectively.
US stock futures markets pointed to a 4.1 per cent rise for the S&P 500 benchmark later in the day. FTSE 100 futures were 4.8 per cent higher, while European stocks were expected to rise 4.5 per cent.
Overnight on Wall Street the S&P 500 ended another volatile session with a 2.9 per cent loss. The US dollar, which has surged amid the coronavirus crisis, weakened in Asia trading following the Fed’s announcement.
Global markets have been crushed in recent weeks by fears the coronavirus outbreak will cause a global recession. The pandemic has shut down supply chains and industries across much of the world, restricting the movements of billions of people.
Tuesday’s rebound “may just be a short-lived thing”, said one hedge fund manager in Tokyo. “Of course you can point to different moves by governments and central banks, but this is still very much a scene where you have markets not knowing enough about what happens in a month’s time to make a solid call.”
Economists said a stronger policy response from governments was still needed. A $2tn US coronavirus stimulus package continued to flounder in the Senate on Monday as Democrats insisted on more stringent limits on how big businesses use coronavirus rescue funds. President Donald Trump later said an agreement was “getting closer”.
“For the US economy to be able to come out of the current crisis and the ongoing recession relatively unscathed, more radical policy interventions will be needed in the next few weeks,” said Anna Stupnytska, global head of macro and investment strategy at Fidelity International.
Sovereign bond markets were little changed, with the 10-year US Treasury yield up 0.03 percentage points to 0.82 per cent. The price of brent crude, the international oil marker, rose 4.1 per cent to $28.13 a barrel.
In Japan, the performance of the Nikkei 225 and the Topix indices continued to diverge, with traders pointing to a series of long-short trades being unwound. The Nikkei surged 7.1 per cent, more than doubling the Topix’s climb thanks to the larger weighting of technology group SoftBank in the former.
SoftBank shares closed 19 per cent higher a day after the company announced that it would sell $41bn in assets to fund a record share buyback. Jefferies analyst Atul Goyal described the move as “music to our ears” and raised his recommendation on the stock to “buy”.
https://news.google.com/__i/rss/rd/articles/CBMiP2h0dHBzOi8vd3d3LmZ0LmNvbS9jb250ZW50LzI0NzIxNzJhLTZkNzQtMTFlYS05YmNhLWJmNTAzOTk1Y2Q2ZtIBP2h0dHBzOi8vYW1wLmZ0LmNvbS9jb250ZW50LzI0NzIxNzJhLTZkNzQtMTFlYS05YmNhLWJmNTAzOTk1Y2Q2Zg?oc=5
2020-03-24 05:54:38Z
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