* Hopes of central bank stimulus lift global shares
* ECB says stands ready to take targeted measures
* G7 conference call planned later on Tuesday
* Australia central bank cuts policy interest rate
By Hideyuki Sano
TOKYO, March 3 (Reuters) - Global shares and oil prices
extended their rebound on Tuesday as policymakers indicated
their willingness to move to ease the economic fallout from the
coronavirus, while investors waited for a conference call by
Group of Seven heads for trading cues.
Finance ministers from the G7 group and central bank
governors will hold a conference call on Tuesday (1200GMT) to
discuss measures to deal with the widening coronavirus outbreak
and its economic impact.
The plan came after the European Central Bank (ECB) on
Monday joined the chorus of central banks signalling a readiness
to deal with the growing threats from the outbreak. "Policymakers globally are talking about supporting the
economy. So short-term players, including myself, are closing
positions for now ahead of the G7 call," said Masaru Ishibashi,
joint general manager of trading at Sumitomo Mitsui Bank.
Earlier messages from the U.S. Federal Reserve (Fed) that it
was prepared to act weighed on the greenback.
The improved mood supported U.S. S&P 500 futures ESc1 ,
which rose as much as 1.0% in Asian trade. But the index pared
gains after Reuters reported that the G7 draft statement on
coronavirus response does not specifically call for new
government spending or coordinated rate cuts. MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS gained 1.4%.
Japan's Nikkei .N225 lost steam and fell 0.7% after
short-covering ran its course and as the yen firmed on the
dollar.
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 markets are fully pricing in a cut of at least 0.25
percentage point to the current 1.50%-1.75% 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.
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.
The Organisation for Economic Cooperation and Development
has cut its forecast of global economic growth this year to
2.4%, the lowest since 2009 and down from a forecast of 2.9% in
November. 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 coronavirus, as authorities
across the country scrambled to prepare for more infections.
"It would be myopic to think that (economic) policy actions
alone will bring back calmness to markets. The reality is, the
coronavirus is still spreading," said Takehiko Masuzawa, head of
sales trading for Japanese clients at Macquarie in Tokyo.
FED RATE CUTS
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 1.116%
US10YT=RR from a record low of 1.030% marked on Monday. The
rate-sensitive two-year notes yield US2YT=RR jumped back to
0.844% from Monday's 3 1/2-year low of 0.710%.
Still, the 10-year and two-year yields are down more than 40
and 50 basis points, respectively, from about two weeks ago.
April Fed funds rate futures FFJ0 still price in about 80%
chance of a 0.50 percentage point cut this month and a total of
almost 1 percentage point cuts by the end of year.
Expectations of Fed rate cuts prompted investors to cut
their exposure to the dollar.
Against the yen, the dollar lost 0.5% to 107.73 yen JPY= ,
slipping towards a five-month low of 107 set on Monday.
The euro firmed to $1.1148 EUR= , having hit an eight-week
peak of $1.1185 in the previous session.
The Australian dollar erased earlier losses to trade at
$0.6545 AUD=D4 , more than a cent above an 11-year low of
$0.64345 set on Friday, after Australia's central bank cut the
policy interest rate to 0.5% from 0.75% as expected.
Oil prices bounced back further after a jump of more than 4%
on Monday, reversing an early decline to multi-year lows.
Hopes of a deeper output cut by the Organization of the
Petroleum Exporting Countries and central banks' policy measures
countered worries about the impact of the virus on demand. O/R
U.S. West Texas Intermediate crude futures CLc1 rose 2.4%
to $47.85 a barrel, up sharply from Monday's low of $43.32 a
barrel, which was the lowest since December 2018.
While the coronavirus continues to dominate investor
attention, focus has also swung to Super Tuesday in the United
States, the biggest day in the Democratic primary elections to
choose a challenger to President Donald Trump.