Asian equities markets at Sydney rallied on Tuesday as investors bet the securities in the U.S Federal Reserve’s promise of unlimited liability and amount funding would ease painful strains in financial security markets even if it does not stop the economic hit of the coronavirus pandemic.
Wall Street was not impressed by investors in Asia while they were encouraged enough to lift E-Mini futures for the S&P 500 by 4.2% and Japan’s Nikkei shot up 7.13%, its most significant daily rise since February 2016
MSCI’s broadest index of Asia-Pacific shares outside Japan jumped 4.9% to more than halve Monday’s drop.
South Korea’s ravaged market climbed 8.6% after the government doubled a planned economic rescue package to 100 trillion won ($80 billion).
K2 Asset Management head of research George Boubouras said despite gains on Tuesday in Asian equities; financial market sentiment remained fragile even as the co-ordinated stimulus measures were implemented around the world.
The biggest trigger for positive sentiment in these markets will be a flattening of the trajectory for the virus,’ he told Reuters by phone from Melbourne.
“Economies around the world are going offline, and that is devastating for economic activity, it’s creating the most robust dislocation in financial markets in living memory.”
Central banks and governments, he said, needed to implement ‘bold and innovative’ monetary and fiscal policies to stave off the prospect of a damaging credit crunch hitting global financial systems.
“It is not a credit crunch yet, and it liquidity measures are critical to stopping that,” he said.
Macquarie Wealth Management divisional director Martin Lakos said the speed of the equity market decline made the current sell-off arguably worse than the 2008 global financial crisis.
“The falls that we have seen have been breathtaking, and it is the speed of those declines that have caught people by surprise,” he said.
[2:40 pm, 24/03/2020] Aishwarya👑: If the number of cases starts to stabilize, and that gives investors confidence, then we could begin to see them revert to fundamentals. Markets are not trading on fundamentals right now.”
In its latest mold-breaking step, the Fed offered to buy unlimited amounts of assets to steady markets and expanded its mandate to corporate and municipal bonds.
Analysts estimated the package could make $4 trillion or more in loans to non-financial firms.
“What they did, more than just starting up some new programs, was to drive home they are willing to do whatever it takes,” said Tom Porcelli, chief U.S. economist at RBC Capital Markets. “We would not call into question their resolve.”
The plan helped calm nerves in bond markets where yields on two-year Treasuries hit their lowest since 2013. Ten-year yields were at 0.8339%, from last week’s peak of 1.28%.
Still, analysts cautioned it would do little to offset the near-term economic damage done by mass lockdowns and layoffs.
Speculation is mounting data due on Thursday will show U.S. jobless claims rose an eye-watering 1 million last week, with forecasts ranging as high as 4 million.
Economists at JPMorgan expect claims to surge by a record 1.5 million and forecast a 14% annualized fall in U.S. gross domestic product for the second quarter. They see European GDP down almost 24% and Latin America 12%.
A range of flash surveys on European and U.S. manufacturing for March are due later on Tuesday and are expected to show deep declines into recessionary territory.
Surveys from Japan showed its services sector shrank at the fastest pace on record in March and factory activity at the quickest in about a decade.