Bank of America just raised its EUR/USD forecast
* Fed cuts rates to 0-0.25%
* Dollar drops 2% vs yen
* Australian market down 7%, Nikkei futures sliding
* Asian stock markets : https://tmsnrt.rs/2zpUAr4
By Wayne Cole
SYDNEY, March 16 (Reuters) - Stocks were slammed on Monday
and the dollar battered after emergency rate cuts in the United
States and New Zealand, and a raft of steps by policymakers
worldwide failed to stem the rout in markets spooked by the
broadening fallout of the coronavirus.
U.S. stock futures plunged 4.8% to hit their downlimit
before daybreak in Singapore. The dollar sank more than 2%
against the yen. FRX/
Australia's benchmark stock index fell 7% in the first
quarter-hour of trade before paring some of the losses. U.S.
crude fell 5% to under $30 per barrel.
New Zealand shares were down 3%. Japan's Nikkei was up 0.1%
after a more than 6% decline on Friday to the lowest since late
2016. South Korea's KOSPI .KS11 was a shade weaker.
That left MSCI's index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS off 0.5% to a level not seen since early 2017.
The U.S. Federal Reserve cut interest rates by 100 basis
points on Sunday to a target range of 0% to 0.25%. It said it
would expand its balance sheet by at least $700 billion in
coming weeks. "It may be a shot in the arm for risk assets and help to
address liquidity concerns...however, it also raises the
question of whether the Fed has anything left in the tank should
the spread of the virus not be contained," said Kerry Craig,
global market Strategist at J.P. Morgan Asset Management.
"We really need to see the fiscal side...to prevent a longer
than needed economic slowdown."
New Zealand's central bank also slashed interest rates by 75
basis points, sinking the country's currency, as it prepared for
a "significant" hit to the economy.
U.S. Treasuries futures TYv1 jumped more than a full
point.
E-mini futures for the S&P 500 index ESc1 dropped 4.77% to
their daily trading limit outside the United States.
Lockdowns and travel bans spread across the globe over the
weekend, affecting tens of millions of people. "(The Fed) must really be scared. To do that in one fell
swoop is really quite shocking," said Robert Pavlik, chief
investment strategist at Slatestone Wealth LLC in New York.
"They pulled out whatever weapons they had and my sense is I
think it may help initially but I don't think it goes much
further because this is still a developing issue. They used up
basically all their ammunition and we're down to sticks and
stones."
Five other central banks also cut pricing on their swap
lines to make it easier to provide dollars to their financial
institutions facing stress in credit markets. The swap lines were set up by the Fed, the Bank of Canada,
European Central Bank, Bank of England, Bank of Japan and Swiss
National Bank during the financial crisis. They also agreed to
offer three-month credit in U.S. dollars on a regular basis and
at a rate cheaper than usual.
The move was designed to bring down the price banks and
companies pay to access U.S. dollars, which has surged in recent
weeks as the pandemic spooked investors.
U.S. President Donald Trump called the move "terrific" and
"very good news." Along with the New Zealand cut, and Australia's central bank
poured $3.6 billion in liquidity into Australia's financial
system. "Global markets have dislocated further with increasing
signs of stress in some markets, sharply reduced liquidity, and
price action hinting at forced selling," RBC economist Su-lin
Ong said in a note.
"Beyond just a tightening of financial conditions, the risk
is these moves worsen a real economy already struggling with the
onset of COVID-19," she added.
In currency markets, the dollar was last down 0.9% on the
Japanese yen at 106.86, having fallen 1.7% earlier in the day
JPY= . The euro climbed 0.1% to $1.1119.
The risk-sensitive Australian dollar fell 0.5% to $0.6163
AUD=D4 while the New Zealand dollar NZD=D4 slipped 0.3% to
$0.6040. Oil prices fell about 5% and gold XAU= rose.
Brent crude LCOc1 was last off $1.17, or 3.5%, to $32.68
per barrel while U.S. crude slipped 73 cents, or 2.3% to $31 a
barrel. O/R
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Asia stock markets https://tmsnrt.rs/2zpUAr4
Asia-Pacific valuations https://tmsnrt.rs/2Dr2BQA
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