Business

Global shares extend rebound on policy action hopes

TOKYO: Global shares and oil prices extended their rebound on Tuesday on mounting speculation policymakers around the world would move to ease the economic fallout from the spreading coronavirus.

The European Central Bank on Monday joined the chorus of central banks signaling a readiness to deal with the growing threats from the outbreak.

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Earlier messages from the U.S. Federal Reserve that it was prepared to act weighed on the greenback against a basket of currencies.

The improved confidence supported U.S. S&P 500 futures, which rose 0.5per cent in early Asian trade on Tuesday, a day after the S&P 500 gained 4.60per cent, the biggest gain since December 2018.

Japan's Nikkei jumped 1.6per cent while MSCI's broadest index of Asia-Pacific shares outside Japan gained 0.8per cent.

South Korea's Kospi added 2.4per cent and Australian shares advanced 1.8per cent ahead of an expected rate cut by the Reserve Bank of Australia.

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The rout in global stocks last week had already prompted Fed Chair Jerome Powell and Bank of Japan Governor Haruhiko Kuroda to flag a readiness to move.

Money market pricing shows traders now expect a 100per cent chance of a 0.25 percentage point cut to the current 1.50per cent-1.75per cent target rate at the Fed's March 17-18 meeting as well as a 0.10 percentage point cut to the ECB's key rate at March 12 meeting.

G7 finance ministers are also expected to hold a conference call on Tuesday (1200 GMT), sources said, to discuss measures to deal with the economic impact of the coronavirus outbreak.

"There are hopes that G7 countries will take some sort of coordinated actions to fight the virus, possibly including fiscal spending," said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui DS Asset Management.

The frantic moves by policymakers reflected growing fears that the disruption to supply chains, factory output and global travel caused by the new epidemic could deal a serious blow to a world economy trying to recover from the U.S.-China trade war.

Coronavirus is now spreading much more rapidly outside China than within the country, leading the world into uncharted territory, although the World Health Organization (WHO) has so far stopped short of calling it a pandemic.

In the United States, six people in the Seattle area have died of the illness caused by the new coronavirus, as authorities across the country scrambled to prepare for more infections.

RISK RETURNS

The rebound in global stock prices saw U.S. bond yields roll back some of their sharp falls.

The 10-year U.S. Treasuries yield retreated to 1.155per cent from a record low of 1.030per cent marked on Monday. The rate-sensitive two-year notes yield jumped back to 0.903per cent from Monday's 3 1/2-year low of 0.710per cent.

Still, the 10-year and two-year yields are down about 40 and 50 basis points, respectively, from about two weeks ago.

April Fed funds rate futures still price in about 80per cent chance of a 0.50 percentage point cut.

Expectations of Fed rate cuts prRead More – Source