(Adds comments, U.S. administration stimulus program)
* Lack of liquidity roils European fixed-income markets
* Crude oil futures tumble to 18-year low
* Dollar index breaks through 100 to near three-year highs
By Herbert Lash
NEW YORK, March 18 (Reuters) - Global equities tumbled anew
on Wednesday, with bond and gold prices also falling in an
unusual tandem, as markets grappled with the sheer scale of
government programs and handouts aimed at softening the economic
shockwave from the coronavirus.
The Trump administration asked Congress to approve $500
billion in cash payments to taxpayers in two rounds starting
April 6 and $50 billion in secured loans to U.S. airlines to
address the outbreak's impact, according to a document seen by
Reuters. Traders are struggling to sort out the various moves by
global central banks and governments to shore up economies
bracing for what looms as a short but deep global recession from
a pandemic still on the rise.
Investors dumped precious metals and other safe-havens in
favor of cash after the additional U.S. stimulus measures
announced Tuesday failed to calm markets hit by mounting fears
over the economic downside from the coronavirus.
Estimates for the duration of the damage extend out into the
summer. Japan already is in a recession, a downturn is imminent
in Europe and a U.S. recession will start in the second quarter,
a report from IHS Markit said.
The coronavirus has raised the prospect of the steepest ever
annual fall in oil demand, Goldman Sachs said. U.S. crude
futures plummeted to an 18-year low and Brent hit more than
16-year low as travel and social lockdowns slammed demand.
Certain correlations are breaking down in the markets as
typical safe-haven assets sell off, said Yousef Abbasi, global
market strategist at INTL FCStone Financial Inc in New York.
"During a dramatic risk-off situation you would expect to
see at least a little bit of a bid in bonds or maybe in gold,
but we're seeing the opposite," Abbasi said.
"Despite the continued pain in equities, the safe-haven
asset correlation seems to be now trading with risk assets,
rather than the inverse to them," he said.
Bond prices tumbled, instead of rising, as investors sold to
raise cash. Yields on the benchmark 10-year U.S. Treasury
US10YT=RR yield rose to 1.257%, after earlier hitting 1.226%.
In Europe, the gap between German and other euro zone bond
yields widened, with investors demanding higher premiums to
hold anything but German debt.
Ten-year French government bonds yielded 69 basis points
more than their German counterparts, the most since April 2017.
The gap between 10-year German and Dutch debt grew as wide as 37
basis points, the most since July 2015.
Gold dropped 2%, falling below $1,500 an ounce.
"Gold continues to suffer from risk-off panics in the
market, trading back below $1,500 level," said Tai Wong, head of
base and precious metals derivatives trading at BMO.
"Liquidity here, as in most markets, is deeply compromised
and we expect to see continuing volatility, mood-driven swings,"
Wong said.
MSCI's gauge of stocks across the globe .MIWD00000PUS shed
6.26% and emerging market stocks lost 5.34%. The pan-European
STOXX 600 index .STOXX lost 3.99%.
On Wall Street, the Dow Jones Industrial Average .DJI fell
1,660.63 points, or 7.82%, to 19,576.75. The S&P 500 .SPX lost
177.29 points, or 7.01%, to 2,351.9 and the Nasdaq Composite
.IXIC dropped 462.37 points, or 6.3%, to 6,872.41.
Boeing Co BA.N fell another -22.1% as the planemaker
called for a $60 billion bailout for U.S. aerospace
manufacturers facing the fallout of an extended collapse in
global travel. European bourses tumbled, with indexes in London .FTSE ,
Frankfurt .GDAXI and Paris .FCHI plunged from 4% to 5%.
In Asia, the MSCI's broadest index of Asia-Pacific shares
outside Japan .MIAPJ0000PUS dropped 4% to lows last seen in
summer 2016, led by a 6.4% fall in Australia. Japan's Nikkei
.N225 dipped 1.7%.
The economic slowdown will be tough on travel-related
industries, gaming and brick and mortar retail, said Scott
Crowe, chief investment strategist at real estate-focused
CenterSquare Investment Management in Philadelphia.
U.S. clothing retailer Gap Inc GPS.N and luxury department
store operator Neiman Marcus NMRCUS.UL will close their stores
for two weeks, joining other retailers in a vast effort to stem
the spread of the coronavirus. "It's a little less obvious whether the government will
start bailing out retailers. The problem is that a lot of these
retailers were already teetering on a knife edge coming into
this," Crowe said. "There are very few industries right now that
can sustain to a four- to eight-week shutdown."
U.S. crude hit its lowest since March 2002, falling even
after weekly government data was less bearish than expected. The
draw on gasoline stockpiles and smaller-than-expected build in
crude inventories showed that people were preparing ahead of
business and school closings, analysts said.
U.S. crude CLcv1 fell 18.18% to $22.05 per barrel.
"We are in the midst of the mayhem really, and I think there
is still a risk that the increasing number of infections will
keep markets on their toes," said Hans Peterson, global head of
asset allocation at SEB investment management.
"It is hard to know how deep the recession will be, and as
long as we have that situation it is hard to lift sentiment."
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Market selloff speed, severity eclipses previous dislocations
https://tmsnrt.rs/2x8mWri
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