* U.S. Treasury yields near record lows
* Euro STOXX 600 gains 0.7%
* S&P 500 futures rise as Biden rallies in primaries
* Dollar slides vs Asian currencies
* [9:23 AM] Wilson, Thomas (Reuters)
* Graphic: World FX rates in 2020 http://tmsnrt.rs/2egbfVh
* Asian stock markets: https://tmsnrt.rs/2zpUAr4
(Releads; changes dateline and byline; adds quotes; updates
prices throughout)
By Tom Wilson and Scott Murdoch
LONDON/HONG KONG, March 4 (Reuters) - Bonds held their gains
on Wednesday as investors digested the U.S. Federal Reserve's
dramatic move to cut interest rates in an effort to contain
economic damage from the coronavirus.
The surprise 50-basis-point cut, the Fed's first
off-schedule move since 2008, came with comments highlighting
both the scale of the challenge and the limits of monetary
policy. In response, the benchmark 10-year U.S. Treasuries yield
US10YT=RR , which falls when prices rise, held below 1% - not
far over the overnight low of 0.9060%.
Euro zone bond yields also held near record lows, with
Germany's benchmark 10-year Bund yield DE10YT=RR around
-0.64%, near six-month lows set on Monday.
Some saw the Fed's extraordinary move as a decision to move
hard and early because it expected further economic damage from
the spread of the coronavirus.
"They have signalled willingness to take further action,
which is why we are seeing a further rally in bonds," said Tim
Drayson, head of economics at Legal & General Investment
management. "Some argue that monetary policy can't fight the
supply shock - but it will support demand and confidence."
With safe-haven currencies in demand, the dollar was near
five-month lows versus the yen JPY=EBS and fell to its lowest
against the Swiss franc CHF=EBS in almost two years. It was
flat against a basket of six major currencies =USD .
Global stock markets were mixed as investors digested the
Fed's move and a strong performance by Joe Biden in the
Democratic Party primaries in the United States.
The Euro STOXX 600 .STOXX gained 0.7%. Markets in
Frankfurt .GDAXI and London .FTSE rose around 0.8% and Paris
.FCHI 0.7%. On Wall Street, S&P 500 futures ESc1 climbed
1.5% on Biden's showing, after falling overnight despite the
Fed's rate cut.
Biden, a moderate considered less likely to raise taxes and
impose new financial regulations, won primaries in at least
eight states. That set up a one-on-one battle for the Democratic
presidential nomination with democratic socialist Bernie
Sanders. The European moves built on gains for Asia-Pacific markets,
where MSCI's broadest index of shares outside Japan
.MIAPJ0000PUS rose 0.3%.
Korean stocks .KS11 gained 2% on a $9.8 billion government
stimulus package to mitigate the coronavirus impact.
The MSCI world equity index .MIWD00000PUS , which tracks
shares in 49 countries, gained 0.2%.
CUTS NOT ENOUGH?
The Fed's surprise move followed a shift in money market
pricing late last week. 0#FF: Futures swung rapidly to
anticipate such a cut at the Fed's March meeting. FEDWATCH
Now, they imply another 50 basis points of easing by July,
even though investors and the Fed itself raised doubts that
easing will help deal with a public health crisis.
"If you're in China and you can direct liquidity exactly
where you need to, and have rate cuts where you want them to be,
monetary policy is very effective," said Sebastien Galy, senior
macro strategist at Nordea Asset Management.
"In the West, in a democracy, monetary policy is less
effective - you need to incentivise banks to do what is in to
the benefit of the whole."
The coronavirus has killed more than 3,000 people, about
3.4% of those infected - far above seasonal flu's fatality rate
of under 1%. It continues to spread beyond China -- Italy
reported a jump in deaths to 79 and South Korea reported more
than 500 new cases on Wednesday.
"The question here is whether a conventional interest rate
response is sufficient," said Sameer Goel, chief strategist,
Asia macro, at Deutsche Bank in Singapore.