GLOBAL MARKETS-Asian stocks set to slide on U.S. Fed fears, interest rate stance

By Suzanne Barlyn
May 14 (Reuters) - Asian equities were set to slump on
Thursday after the head of the Federal Reserve warned of a
"significantly worse" U.S. recession than any downturn since
World War Two because of coronavirus pandemic fallout,
sentiments that drove bonds higher on a safety bid.
Fed Chair Jerome Powell on Wednesday issued his sober review
of an economy slammed by a record pace of job losses and bracing
for worse ahead as most U.S. states moved toward reopening
following lockdowns aimed at curbing the spread of the virus.
Hong Kong's Hang Seng index futures .HSI .HSIc1 slipped
0.92%, Australian S&P/ASX 200 futures YAPcm1 fell 1.07%, while
Japan's Nikkei 225 futures NKc1 rose 0.05%.
"We're picking up from what was a negative session in
offshore markets - New York in particular," said Ray Attrill,
head of foreign exchange strategy for National Australia Bank in
Sydney.
A pushback against Powell's "downbeat assessments" about
U.S. economic risks and his rejection of the idea of using
negative interest rates as a tool for economic recovery "will
spill into the Asia session," Attrill said.
Wall Street's three major indexes closed lower for the
second day in a row, the Dow Jones Industrial Average .DJI
fell 2.17%, the S&P 500 .SPX lost 1.75%, and the Nasdaq
Composite .IXIC dropped or 1.55.
Still, Powell downplayed of the idea of using negative
interest rates pushed the U.S. dollar higher against a basket of
currencies.
The U.S. Dollar Currency Index =USD , which measures the
greenback's strength against six major currencies, was up 0.23%
on the day at 100.26. The index fell as low as 99.57 earlier in
the session.
Powell's comments followed a sharp selloff in equities on
Tuesday after a warning from leading U.S. infectious disease
expert Anthony Fauci that the virus was not yet under control.
Fauci's comments prompted concerns about how the economy would
emerge from weeks of virus-related lockdowns. Authorities in Wuhan, the Chinese city where the novel
coronavirus emerged, has launched an ambitious campaign to test
all of its 11 million residents, after a cluster of new cases
raised fears of a second wave of infections. But a decision by an independent board overseeing billions
in U.S. federal retirement dollars that it would indefinitely
delay plans to invest in some Chinese companies also helped to
fuel Wednesday's decline.
The administrators froze the plan days after the Trump
administration told it to "halt all steps" tied to shifting its
$40 billion international fund to track the MSCI All Country
World ex-U.S.A. Investable Market Index .MIWU00000PUS
In commodity markets, oil prices fell about 2% despite the
first decline in U.S. crude inventories since January, following
Powell's remarks that a rebound may take awhile. L4N2CV0LW
The slide followed an earlier rally on optimism that
slumping fuel demand would recover, while producers have slashed
production to cut the mounting supply glut during the pandemic.
Global benchmark Brent crude LCOc1 settled down 79 cents,
or 2.6% at $29.19 a barrel. West Texas Intermediate crude
futures, the U.S. benchmark, CLc1 settled down 49 cents, or
1.9% at $25.29 a barrel.
Yields on benchmark U.S. Treasury 10-year notes US10YT=RR
last fell 1/32 in price to yield 0.6525%, from 0.651%..
MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS rose 1.09 points or 0.23 percent, to 471.99.

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