Global markets: Here comes the cavalry?

LONDON (Reuters) – The recovery in global stock markets and oil prices accelerated on Tuesday, as global policymakers pointed to a united front to address the economic consequences of the spread of the coronavirus.

FILE PHOTO: A man passes in front of an electronic dashboard showing stock prices outside a brokerage in Tokyo, Japan on January 4, 2017. REUTERS / Kim Kyung-Hoon

Europe’s main dishes increased more than 2.5% in what is emerging as the best day in the region since 2016, when dealers rediscovered their appetite for risk and discarded safer assets but with lower profits. [.EU] [.N]

Wall Street futures also rose 0.8%, after their biggest jump since 2009 on Monday: 4% and 5% for the S&P 500 and the Dow Jones Industrial Average.

The reason? The chivalry. The G7 finance ministers and central bank governors were conducting a conference call to discuss measures to deal with the outbreak.

According to a source from the group, a statement he is preparing does not detail any firm fiscal or monetary stimulus plan, but for investors it was at least a reassuring signal.

“This (market rebound) is based solely on the expectations of central banks and governments that coordinate their actions to mitigate the impact of the virus,” said Marchel Alexandrovich, European economist at Jefferies.

He said the central bank’s words of support were exactly what investors wanted to hear, but added an important warning.

“I think that in the real world, fiscal policy must play a more important role. It has to translate into an action that leaks into the real economy, ”such as giving companies and households discounts on loan payments until the situation improves.

The slight liquidation of the super-secure government bonds came after the US Treasury bond yields. UU. They reached historic lows in recent days as concerns about a possible global recession increased.

The decision to make a call from the G7 came after the director of the European Central Bank, Christine Lagarde, joined the choir of heads of the central banks of the heavyweights, indicating that they were ready to face the threat of the outbreak .

Previous messages from the Federal Reserve of the United States that he was prepared to act continued to weigh on the dollar, which fueled expectations of a considerable reduction in rates at his meeting in two weeks.

Against the yen, the dollar lost 0.4% to 107.95 yen, falling towards a minimum of five months of 107 set on Monday.

Lagarde’s comments meant that the euro was slightly lower at $ 1,111, having reached a maximum of eight weeks of $ 1,11185 in the previous session after a series of other important ECB politicians said the bank was still Assessing the situation

The Australian dollar, which is seen as an indirect bet in China due to the raw materials it sells there, stood above a recent 11-year low largely in short coverage after its central bank reduced the rates of interest earlier in the day.

Oil prices gained another 2% after a jump of more than 4% on Monday. Intermediate crude oil futures in the western US UU. In Texas they were $ 48 per barrel, while Brent crude was $ 52.9. [O/R]

The improved sentiment helped the US S&P 500 futures. UU. To rise up to 1%. The MSCI global stock index rose 0.6% after getting its best day since 2011 on Monday after a Wall Street roar pushed it a little more than 3%.

Asia-Pacific shares outside Japan ended 0.8% higher, above the previous peaks, but still mark the second consecutive session of increases.

“Except for any further deterioration of the coronavirus outbreak, we believe that global cyclical recovery is likely to gain more momentum,” Schroders’ Asian multi-asset team said in a report.

“This is likely to benefit stocks with greater leverage for global growth, as higher profits could support dividend growth.”

(Graphic: Coronavirus hit the world’s financial markets, here)

MONEY MARKETS

The Nikkei of Japan lost strength and closed 1.2% lower after the short hedge continued its course and when the yen reaffirmed in the dollar, but South Korea’s Kospi rose 0.6%.

Australian stocks ended at 0.7% after the central bank reduced interest rates to a record low of 0.5%, the fourth reduction in less than a year.

“It is reasonable to wait for a response that reflects a combination of fiscal measures and central bank initiatives,” Bank of England Governor Mark Carney said Tuesday.

Money markets have full prices at a cut of at least 0.25 percentage points at the current target rate of 1.50% -1.75% at the Fed meeting from March 17 to 18, as well as a cut of 0.10 percentage points at the rate ECB key minus 0.5% in March 12 meeting.

The frantic movements of policymakers reflected growing fears about the disruption of supply chains, factory production and global travel caused by the new epidemic, just as the world economy was trying to recover from the effects of the trade war between the United States and China.

The coronavirus, which has already claimed more than 3,000 lives, now seems to be spreading much faster outside of China than within the country. That brings the world to an unexplored territory, although the World Health Organization has so far failed to call it a pandemic.

The yields of US bonds. UU. They reduced some of their strong falls.

The yield on US 10-year Treasury bonds moved to 1.15% from a record low of 1,030% set on Monday. The yield of the two-year bonds rose again to 0.87% from a minimum of 3 and a half years of 0.710%, although the yields of short-term bonds more sensitive to the rate continued to fall.

Funds for April Fed fund rates are still priced at around 80% chance of a 0.50 percentage point cut this month and a total of almost 1 percentage point by the end of the year.

There was also the so-called Super Tuesday factor in play.

Fourteen states and a US territory. UU. They are organizing primary elections, a wave that could bring more clarity about which Democratic presidential contenders voters prefer to challenge Republican President Donald Trump in November.

Additional reports by Karin Strohecker in London and Hideyuki Sano in Tokyo; Edition of Philippa Fletcher and Catherine Evans

Our Standards:The principles of trust of Thomson Reuters.

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