* S&P 500 futures bounce, Nikkei jumps
* Investors relieved as Fed pledge eases bond stress
* Dollar off peaks on promise of bottomless liquidity
* Factory surveys show extent of economic damage
By Sujata Rao and Marc Jones
LONDON, March 24 (Reuters) - Financial markets rebounded on
Tuesday, with stocks and oil jumping about 4% in Europe, while
the safe-haven dollar recoiled as unprecedented global stimulus
efforts gained traction.
Although the U.S. Federal Reserve's offer of unlimited
bond-buying was not expected to mitigate the devastating impact
of the coronavirus alone, investors hoped it would help avert a
global depression with the help of other state rescue packages.
The Fed's action had not cheered Wall Street for long on
Monday, with losses of 2%-3% on major indexes, but the mood
improved on Tuesday, as other governments and central banks
stepped in.
Wall Street S&P 500, Dow Jones and Nasdaq indexes were
expected to bounce 4% .N ESc1 , the main European bourses
.FTSE .GDAXI .FCHI were up similar amounts and oil, gold
and copper had all swung 3%-5% higher. .EU O/R GOL/ MET/L
"Today there is a strong recovery connected to the move that
the Fed has introduced this massive weapon," said Francois
Savary, CIO of wealth manager Prime Partners, adding the Fed
needed to prioritise fixing the seize-ups in funding markets.
"The key issue at the end of the day is that we need to deal
with a credit markets that is completely closed. First they
needed to stop this increase in bond yields... second, they
needed to make sure that there is a return of liquidity in the
credit then it will be equities - in that sequence."
Alongside buying unlimited amounts of assets, the Fed will
also expand its mandate to corporate and municipal bonds and
backstop a series of other measures that analysts estimate will
deliver $4 trillion-plus in loans to non-financial
firms. There were also signs of progress in Congress on a $2
trillion U.S. stimulus deal, which Treasury Secretary Steven
Mnuchin hoped was "very close".
Other countries are unveiling their own measures. South
Korea's ravaged market climbed 8.6% .KS11 after the government
doubled a planned economic rescue package to 100 trillion won
($80 billion). In China, mainland stocks posted their biggest gain in three
weeks with a rise of almost 3% .CSI300 , while Japan's Nikkei
.N225 soared 7%, its biggest daily rise since February 2016.
.SS .T
But investors were still wary, as global coronavirus
infections have topped 350,000 and China posted a rise in new
infections brought in from abroad.
Japan said it was postponing the Olympics, General Motors
became the latest to abandon its outlook for the year
while Ford had been the latest corporate giant to
have its credit rating cut to the brink of 'junk' on Monday. are continuing to bounce up on the latest policy
announcements and then sliding back down as the economic reality
of the situation re-emerges," Deutsche Bank strategist Jim Reid
said.
Euro zone business activity data collapsed to a record low
on Tuesday and suffered by far its biggest one-month fall since
the survey began in 1998.
But government and central bank financial support helped
calm nerves in bond markets, where yields on two-year U.S.
Treasuries hit their lowest since 2013. Ten-year yields were at
0.8339%, from last week's peak of 1.28% US10YT=RR .
Germany's 10-year yield was up 2 basis points on the day at
-0.36%, compared with a 4 bps rise before the purchasing
managers index (PMI) releases DE10YT=RR , all small moves when
compared to record lows hit at -0.90% earlier in March.
"I think we have reached some kind of equilibrium trading
range in safe havens," said DZ Bank strategist Rene Albrecht.
"Given the prospect for the economic downturn and much more
(debt) issuance going forward, I think the level where yields
are settling down is the place for them to be."
ALL ABOUT THE ECONOMY
The impact of the virus on the global economy is evident in
a series of growth forecast downgrades and advance readings of
PMIs across the world's biggest economies.
German activity plunged to the lowest since the 2009 crisis,
driven by a record services contraction, while French activity
hit all-time lows. Japan posted its biggest-ever services fall.
"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," said George
Boubouras, head of research at K2 Asset Management in Melbourne.
However, the prospect of massive Fed funding pushed the
greenback 0.8% lower against rivals, off three-year peaks
=USD , falling against the yen JPY= and sliding 1% versus the
euro EUR= .
Commodity and emerging market currencies benefited, with the
Australian dollar up as much 2% to $0.59315 AUD=D3 and well
off 17-year lows.
There was less market volatility too. A gauge of expected
euro-dollar swings eased below 12%, from above 14% on Monday
EUR1MO=FN , and a measure of U.S. equity volatility slipped to
one-week lows around 55 points .VIX .
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China's coronavirus cases JPG https://tmsnrt.rs/2Qq4pxe
Volatility is back on Wall Street png https://tmsnrt.rs/39JliL5
Global financial markets since coronavirus escalated https://reut.rs/39dPxbR
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