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GLOBAL MARKETS-Stocks cling to stimulus hopes, Treasuries slide towards 1%

Published 02/03/2020, 12:48
Updated 02/03/2020, 12:54
© Reuters.  GLOBAL MARKETS-Stocks cling to stimulus hopes, Treasuries slide towards 1%
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(Updates ahead of U.S. markets open)

* European shares buckle again after early charge

* Wall Street futures back to flat after earlier rise

* U.S. Treasury yields slide towards 1% for first time

* BOJ and BoE make soothing noises

* Oil higher on signals of supply cuts from OPEC

By Marc Jones

LONDON, March 2 (Reuters) - World stock markets regained a

measure of calm on Monday as hopes for a raft of global interest

rate cuts to soften the economic blow of the coronavirus

steadied nerves and drove U.S. Treasury yields close to 1%.

After last week's worst plunge for equities markets since

the depths of the 2008 financial crisis, it was always going to

be a wild ride.

Asia had initially dived again after China reported a record

slump in factory activity but the

region rallied to finish higher as bond yields sunk and talk of

OPEC supply cuts sent oil prices roaring up as much 3.5%. O/R

Europe then made a blistering start. The FTSEurofirst 300

.FTEU3 jumped over 2%, putting it on course for its best day

in well over a year, only to suffer a major mid-morning wobble

that left it just 0.2% better off. .EU

Wall Street S&P 500 and Dow futures ESc1 1YMc1 went on a

similarly erratic trip; first diving, then springing, then

stumbling and eventually stalling near-flat. .N

"The market is coming back because there is perception that

there will be a coordinated G7 policy response," said BlueBay

Asset Management's head of credit strategy David Riley.

"We have Fed and ECB meetings coming up in the next couple

of weeks. The Fed is the key one and it will be very hard for

them to hold off (from rate cuts) if we are in a situation where

the economic downsides are becoming more prevalent."

The sheer scale of losses last week -- almost $6 trillion

was wiped off world stocks -- have led financial markets to

price in policy responses from almost every major central bank.

L4N2AU0ZB

Futures now imply a full 50 basis point cut by the U.S.

Federal Reserve at its March 17-18 meeting 0#FF: , followed by

a 10 basis point snip from the ECB in April. Australian markets

0#YIB: are meanwhile pricing in a quarter-point cut at the

RBA's Tuesday meeting.

Bank of Japan Governor Haruhiko Kuroda fanned those

expectations, saying the BOJ would take steps to stabilise

markets if needed.

The Bank of England said it, too, was monitoring

developments and assessing the "potential impacts on the global

and UK economies and financial systems". Bets that the Fed will be first of the pack to move -- and

probably by the most, considering it has more room to cut

--pushed the dollar to a one-month low against the world's major

currencies as bond yields slid south. /FRX

Individually, it was down at $1.1070 to the euro EUR= ,

flat on the yen at 108.08 yen JPY= and only made gains on the

pound GBP= , which wilted as what are likely to be fraught

post-Brexit trade talks with the EU began in Brussels.

JUST ANOTHER MANIC MONDAY

MSCI's broadest index of world shares .MIWD00000PUS rose

for the first time in eight sessions after recovering from

Asia's early dip, though the 0.3% uptick barely offset its 10.4%

tumble last week.

The disruption to global supply chains, productivity and

global travel caused by the coronavirus has darkened the outlook

for a world economy already struggling with the fallout of the

U.S.-China trade war.

In Paris, the Organisation for Economic Cooperation and

Development (OECD) warned the outbreak was shaping up to cause

the worst global downturn since the 2008-09 financial crisis. In

a bleak scenario, growth could drop to just 1.5%. "The main message from this downside scenario is that it

would put many countries into a recession, which is why we are

urging measures to be taken in the affected areas as quickly as

possible," OECD chief economist Laurence Boone told Reuters.

The bond markets were giving their view loud and clear.

The benchmark U.S. 10-year Treasury bond hit a fresh record

low yield of 1.0300% US10YT=RR overnight and was last at

1.065%. In Europe, German Bunds were the lowest in six months at

-0.64%. GVD/EUR

Analysts said a sustained market recovery depended on the

rate of new coronavirus infections slowing outside China.

The epidemic, which began in the Chinese province of Hubei,

has killed 3,000 people worldwide as authorities race to contain

infections in Japan, Iran, Italy, South Korea and the United

States.

Commodity markets were part of Monday's global

stabilisation. Oil prices bounced as much as $1.5 a barrel off

multi-year lows, helped by hopes of a deeper cut in output by

OPEC. O/R

Brent crude last traded at $50.5 per barrel LCOc1 and U.S.

crude CLc1 at $45.2 per barrel, while industrial metals copper

and nickel were 1.5% and 2.5% higher respectively and gold

jumped 1.4% after a dip last week. MET/L GOL/

World markets performance https://tmsnrt.rs/37RShMa

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