* Graphic: World FX rates in 2020 http://tmsnrt.rs/2egbfVh
* S&P E-mini futures up 0.7%
* MSCI All Country World down 0.13%
By Ritvik Carvalho
LONDON, Feb 25 (Reuters) - Global stock markets stabilised
on Tuesday after a wave of early selling petered out and Wall
Street futures managed a solid bounce after the previous day's
sharp selloff on fears about the spreading coronavirus.
European shares recorded their worst one-day loss since June
2016 on Monday as worries about the spread of the new virus far
beyond China whacked global markets and risk sentiment.
But the pan-European STOXX 600 index rose 0.6% in early
trade in London .STOXX .EU , with Italian shares, which
tumbled 5.4% on Monday, also 0.6% higher. Italy is grappling
with the worst outbreak of coronavirus in Europe.
"There is no question financial markets are coming round to
the realisation that this particular crisis is likely to have a
slightly longer shelf life than many thought was the case a
couple of weeks ago," said Michael Hewson, chief markets analyst
at CMC Markets in London.
"For now, there appears little prospect that financial
markets look likely to settle down in the short term, which
means investors will have to get used to an extended period of
uncertainty and volatility."
MSCI's All Country World index, which tracks shares across
47 countries, was down 0.16%, paring some earlier losses when
Asian markets were trading. The index suffered its biggest daily
drop in two years on Monday.
Euro zone government debt markets stabilised, with Italian
bonds on steadier ground after suffering their worst day in over
two months. GVD/EUR
Some dealers cited a Wall Street Journal report on a
possible vaccine as helping sentiment, though human tests of the
drug are not due until the end of April and results not until
July or August. Whatever the cause, E-Mini futures for the S&P 500 ESc1
bounced 0.7% to pare some of the steep 3.35% loss the cash index
.SPX suffered overnight.
The VIX volatility index .VIX , also known as Wall Street's
"fear gauge", fell 2.2 points to 22.8, away from highs not seen
since January 2019 that it hit on Monday.
In Asia earlier, South Korea's hard-hit market .KS11 eked
out a 0.6% rise and helped MSCI's broadest index of Asia-Pacific
shares outside Japan .MIAPJ0000PUS fight back to flat.
Japan's Nikkei .N225 was down 3.4%, catching up with the
global sell-off after having been shut on Monday, while Shanghai
blue chips .CSI300 eased 1.6%.
European and U.S. stocks have suffered their biggest loses
since mid-2016 amid fears the coronavirus may be morphing into a
pandemic that could cripple global supply chains and wreak far
greater economic damage than first thought.
The risks are such that bond markets are starting to bet
central banks will have to ride to the rescue with new stimulus.
Futures for the Federal Reserve funds rate 0#FF: have
surged in the last few days to price in a 50-50 chance of a
quarter-point rate cut as early as April. In all, they imply
more than 50 basis points of reductions by year end.
Central banks across Asia have already been easing policy,
while governments have promised large injections of fiscal
stimulus, something western countries might also have to
consider.
Data showing sales of smartphones in China tumbled by more
than a third in January, underlining the potential economic
impact of the virus, helped knock Apple Inc AAPL.O shares 3.5%
lower on Monday. BET ON RATE CUTS
The coronavirus death toll climbed to seven in Italy on
Monday and several Middle East countries were dealing with their
first infections, feeding worries about a pandemic. The rush to bonds left yields on 10-year U.S. Treasury notes
US10YT=RR at 1.39%, down almost 20 basis points in just three
sessions and paying less than overnight rates. Yields are
rapidly approaching the all-time low of 1.321% hit in July 2016.
The sharp drop, combined with the fact the Fed has far more
room to cut interest rates than its peers, kept the U.S. dollar
restrained after a run of strong gains.
"Besides a tapering in the geographical spread of the
coronavirus or unexpected improvements in key short-term macro
indicators, the circuit breaker for these market moves is
starting to move towards the U.S. central bank," Danske Bank
said in a note to clients.
In currencies, the euro edged up a little from recent
three-year lows to reach $1.0862 EUR= , while the dollar lost
0.06% to trade at 110.64 yen JPY= , away from a 10-month top of
112.21. USD/
Against a basket of currencies, the greenback dipped 0.16%
to 99.202 =USD .
Gold ran into profit-taking after hitting a seven-year peak
overnight, and was last down 0.9% at $1,645.57 an ounce XAU= .
Oil steadied after shedding nearly 4% on Monday. U.S. crude
CLc1 was up 0.2% at $51.55, while Brent crude LCOc1 firmed
0.4% to $56.51. O/R
Global stocks' performance vs. reported coronavirus cases https://tmsnrt.rs/3c3WvTr
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