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GLOBAL MARKETS-Markets fall as virus woes strike again

Published 01/04/2020, 10:02
Updated 01/04/2020, 10:06
© Reuters.
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* Stocks backslide as coronavirus threat remain intense
* Dollar braces for U.S. manufacturing data
* Oil market slammed again by supply glut and weak demand
* Industrial metals hammered, bonds ride safety demand

By Marc Jones
LONDON, April 1 (Reuters) - World markets fell on Wednesday
as the coronavirus threat ensured an ugly start to the second
quarter for equities and commodities.
Traders headed for the safety of government bonds, the
dollar .USD= and gold GOL/ as evidence continued to mount
that the virus was sending the global economy into a deep
recession. Tokyo's Nikkei .N225 slumped 4.5% after the worst plunge
in factory activity in almost a decade. The pan-European STOXX
600 .STOXX sank 3.2% .EU and Wall Street futures ESc1
dived 3.1% .N after a dire forecast of likely U.S. coronavirus
deaths. "President Trump warning about two dreadful weeks ahead and
100,000 - 240,000 deaths in the coming months is definitely
putting a negative tone on the market," said Societe Generale
strategist Kit Juckes. "It is pretty risk-off out there. It is
definitely a day of lower bonds yields, falling equity indexes
and tin hats."
Wall Street tumbled on Tuesday, capping the biggest
quarterly fall since 1987 for the Dow Jones and the steepest for
the S&P 500 since the financial crisis. The fact it all happened
in a month and from record highs made it feel all the more
brutal. U.S. economic activity is likely to be "very bad" and the
unemployment rate could rise above 10% because of efforts to
slow the spread of the coronavirus, Cleveland Federal Reserve
Bank President Loretta Mester told CNBC. L1N2BO2UT
There had been some glimmers of hope during Asian trading.
China's factory activity improved in March after plunging in
February. It just scraped into positive territory, beating
analysts' expectations.
Blue-chip Chinese stocks failed to hold their gains,
however, .SS though Australian shares .AXJO bounced 3.5% as
a slowdown in new coronavirus cases there and rising iron ore
prices lifted the market.
But Europe's early plunge meant MSCI's main gauge of world
stocks .MIWD00000PUS was down nearly 1% having slumped 22%
since the start of the year.
The number of coronavirus infections globally headed toward
800,000. In a positive development, Deutsche Bank analysts noted
the global growth in new cases was below 10% for two consecutive
days, having exceeded that rate for most of the past two weeks.
Health officials were not upbeat, however. A World Health
Organization official warned that even in the Asia-Pacific
region, the epidemic was "far from over."

OIL, TOIL AND TROUBLE
In currency markets, the dollar's safe-haven appeal saw it
continue to rose. USD= The yen JPY= held its ground, but the
euro EUR=EBS dropped back under $1.10 as traders braced for
German manufacturing and European Union unemployment figures.
The pound fell to $1.2350 GBP= and plenty of
commodity-exposed currencies from the Australian dollar AUD=
to the Russian rouble RUB= saw 1% losses.
"Don't fight the Fed" is the old adage, but markets seem to
be doing their best to do that anyway – a new set of Fed FX swap
lines on Tuesday was meant to reassure markets that the U.S.
central bank was there to ensure an adequate supply of
dollars. "In my view, markets have still not fully priced in the
damage from the coronavirus, with some people still talking
about V-shaped recovery," said Masahiko Loo, portfolio manager
at Alliance Bernstein in Tokyo.
"The U.S. and Europe are hit by the first wave now, but as
you can see in Asia, there could be more waves from re-imported
cases. Human psychology also does not quickly recover either
after an experience like this."
Demand for the guaranteed income of government bonds pushed
the yield on the benchmark 10-year U.S. Treasury note
US10YT=RR down to 0.63%.
Italian bond yields also held steady as the benefit of
recent European Central Bank measures meant the country - which
has been one of those hit hardest by the coronavirus -
successfully sold 8.5 billion euros of debt. GVD/EUR
Commodity markets were much rougher. Brent crude LCOc1
fell 5.81% to $24.80 per barrel as the United States, Russia,
and Saudi Arabia jostled over a massive oversupply of oil. O/R
Crude oil benchmarks ended the quarter with their biggest
losses in history. Both U.S. and Brent futures got hammered
throughout March by the pandemic and a Saudi-Russia price war.
Global demand has been cut sharply by travel restrictions.
Forecasters at major merchants and banks see demand slumping by
20% to 30% in April, and for weak consumption to linger for
months.

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