* Asian stock markets : https://tmsnrt.rs/2zpUAr4
* Oil crashes more than 20% as Saudi Arabia cuts prices
* Nikkei sinks 4.7%, S&P 500 futures down 4.6%
* Yen surges as Russian rouble, Mexican peso in free-fall
* 10-year Treasury yields drop to 0.5%, drag dollar down
By Wayne Cole
SYDNEY, March 9 (Reuters) - Asian shares sank in a sea of
red on Monday as panicked investors fled to bonds to hedge the
economic shock of the coronavirus, and oil plunged more than 20%
after Saudi Arabia slashed its official selling price.
The world's top oil exporter plans to raise its production
significantly after the collapse of OPEC's supply cut agreement
with Russia, a grab for market share reminiscent of a drive in
2014 that slashed prices by about two thirds. O/R
Brent crude LCOc1 futures slid $9.39 to $35.88 a barrel in
chaotic trade, while U.S. crude CLc1 shed $8.77 to $32.51.
The safe-haven yen surged against emerging market currencies
with exposure to oil, including the Russian rouble and Mexican
peso, as analysts saw danger ahead.
"Today's price action puts at risk the fiscal health of the
vast majority of sovereign producers and budget cuts and
increased debt loads are now looming in the event of a prolonged
period of low prices," warned Helima Croft, head of global
commodity strategy at RBC Capital Markets.
"For the most politically and economically fragile producer
states, the reckoning could be severe."
There were also worries that U.S. oil producers that had
issued a lot of debt would be made uneconomic by the price drop.
Energy stocks took a beating and E-Mini futures for the S&P
500 ESc1 tumbled 4.6% having been limited down at one stage.
EUROSTOXXX 50 futures STXEc1 fell 4.4% and FTSE futures
FFIc1 4.8%. .N
Japan's Nikkei .N225 fell 4.7% and Australia's
commodity-heavy market .AXJO 5%. MSCI's broadest index of
Asia-Pacific shares outside Japan .MIAPJ0000PUS lost 3.0% to a
five-month low, while Shanghai blue chips .CSI300 dropped
2.1%.
Not helping the mood was news North Korea had fired three
projectiles off its eastern coast on Monday. "The scale of the collapse shows that any hopes of a
temporary respite were in vain," said Sean Callow, a senior FX
strategist at Westpac. "The notion that overweight equities is
the only real option in a world of super-low rates now seems to
be from 'The Time Before'.
"U.S. officials have barely moved beyond platitudes about
'strong fundamentals' so there is surely plenty more room for
markets to price in major damage to the U.S. economy."
The number of people infected with the coronavirus topped
107,000 across the world as the outbreak reached more countries
and caused more economic carnage. Italy's markets are sure to come under fire after the
government ordered a lockdown of large parts of the north of the
country, including the financial capital Milan. "After a week when the stockpiling of bonds, credit
protection and toilet paper became a thing, let's hope we start
to see some more clarity on the reaction," said Martin Whetton,
head of bond & rates strategy at CBA.
"Dollar bloc central banks cut policy rates by 125 basis
points, not as a way to stop a viral pandemic, but to stem a
fear pandemic," he added, while noting many had little scope to
ease further.
BOND BUBBLE
Markets are fully priced for at least a half-point rate cut
from the Federal Reserve at its scheduled policy meeting on
March 18, following last week's emergency easing, and a move
toward zero not long after. 0#FF:
The European Central Bank meets on Thursday and will be
under intense pressure to act, but rates there are already
deeply negative.
"The onus is falling, perhaps inevitably on the actions of
governments to abandon budget surpluses and reinvigorate the
demand side of the economy," said Whetton.
Urgent action was clearly needed with data suggesting the
global economy toppled into recession this quarter. Figures out
from China over the weekend showed exports fell 17.2% in
January-February, from a year earlier. Analysts at BofA Global Research estimated the latest
sell-off had seen $9 trillion in global equity value vaporised
in nine days, while the average 10-year yield in the developed
world hit 16 basis points, the lowest in 120 years.
"The clearest outcome of the exogenous COVID-19 shock is a
collapse in bond yields, which once panic fades can induce huge
rotation to 'growth stocks' and 'bond proxies' in equities,"
they wrote in a client note.
Yields on 10-year U.S. Treasuries US10YT=RR plunged to a
once-unthinkable 0.50%, having halved in just three sessions.
Yields on the 30-year long bond US30YT=RR dived 35 basis
points on Friday alone, the largest daily drop since the 1987
crash, and briefly traded under 1% on Monday.
The fall in yields and Fed rate expectations has pulled the
rug out from under the dollar, sending it crashing to the
largest weekly loss in four years =USD . USD/
The dollar extended its slide in early Asia to reach 103.55
yen JPY= , depths not seen since late 2016, while the euro shot
to the highest in over eight months at $1.1387 EUR= .
Gold jumped 1.6% to clear $1,700 per ounce XAU= and reach
a fresh seven-year peak. GOL/
Asia stock markets https://tmsnrt.rs/2zpUAr4
Asia-Pacific valuations https://tmsnrt.rs/2Dr2BQA
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(Editing by Diane Craft, Sam Holmes and Jane Wardell)