* S&P 500 futures rally more than 4%, Treasury yields up
sharply
* European shares jump 3%-4%, Asia ended higher
* Oil prices bounce 5% after huge drop; gold prices fall 1%
* Markets cling to hope of monetary, fiscal stimulus
By Marc Jones
LONDON, March 10 (Reuters) - Oil and equity markets staged
solid rebounds on Tuesday after the previous day's pummelling,
with signs of co-ordinated action by the world's biggest
economies to cushion the economic impact of coronavirus helping
pull investors out of panic mode.
Most benchmark government bond yields also rose from record
lows hit the previous day, as hopes for stimulus to support
global growth in the face of epidemic boosted risk sentiment.
European stocks wasted little time in recouping 3% of the 7%
they had slumped on Monday .EU , one of their worst days on
record. The oil and gas and mining sectors led gains as oil
LCOc1 regained its footing after plunging 25% following the
breakdown of a crucial global oil pact. O/R
Yields on benchmark U.S. 10-year Treasury debt more than
doubled to 0.70% and those on German Bunds jumped around 20
basis points as investors pared some safe-haven holdings.
GVD/EUR
Supporting the mood was a pledge from U.S. President Donald
Trump on Monday to take "major" steps to protect the economy and
float the idea of a payroll tax cut with congressional
Republicans. Japan said it would spend another 430.8 billion yen ($4.1
billion) to ease the effects of the coronavirus outbreak and
Italy's deputy economy minister announced that mortgage payments
would be suspended as the country deals with the second highest
number of cases outside China.
Some of the biggest global investment banks, including JP
Morgan, Citi and Barclays, now expect the Federal Reserve to cut
U.S. interest rates to zero in the coming months as part of a
mass global move to provide some ballast and liquidity to the
financial system.
"As of today, we believe that markets have gone from being
overly complacent to overly pessimistic," the chief investment
officers of Europe's largest asset manager Amundi AMUN.PA
wrote in a note to clients.
"Our central case, instead, is one of a temporary setback,
although more prolonged compared to what we were expecting a
month ago, followed by a recovery," they added.
Oil suffered its sharpest drop since the 1991 Gulf war and
global stocks plunged on Monday after Saudi Arabia launched a
crude price war with Russia, further rattling investors already
anxious about the spread of coronavirus.
U.S. markets were expected to follow the European and Asian
lead, with major stock futures trading up around 4%. ESc1 .N
Japan's Nikkei .N225 had ended the day up 0.85%, after
earlier touching its lowest level since April 2017. .T
Australia's index .AXJO closed up 3.1% as some went
hunting for bargains in beaten down stocks.
China's benchmark Shanghai Composite Index .SSEC traded
2.1% higher as new domestic coronavirus cases tumbled and
President Xi Jinping's visit to the epicentre of the epidemic
lifted sentiment.
The news continued to be negative elsewhere, however, with
Italy ordering its citizens not to move around other than for
work and emergencies and banning all public gatherings.
"Although uncertainty is very high, we now expect similar
restrictions will be put in place across Europe in the coming
weeks," warned economists at JPMorgan.
"We are now expecting a rolling H1 2020 global growth
contraction and a powerful global disinflationary wave to take
hold," they added. "We expect the Fed to cut to zero at or
before its March 18 meeting."
ONUS ON CENTRAL BANKS
Oil rallied around 5% to claw back some of its massive
losses from Monday, offering hope that markets had found a floor
despite still-fragile sentiment.
Benchmark Brent crude futures LCOc1 bounced by $2 to
$36.40 a barrel by 0930 GMT, paring back earlier gains that saw
prices touch a session-high of $37.38 a barrel.
Gold prices fell 1%, retreating from the last session's jump
above the key $1,700 level, as safe-haven demand waned a little
amid speculation about global stimulus measures. GOL/
"In times of turmoil, nothing is more important in restoring
confidence than the government appearing calm and in control of
the situation, (however) tenuous that control may be," Jeffrey
Halley, senior market analyst at broker OANDA, said in a note.
Such has been the conflagration of market wealth that
analysts assumed policymakers would have to react aggressively
to prevent an economic crisis.
The U.S. Fed on Monday sharply stepped up the size of its
fund injections into markets to head off stress.
Having delivered an emergency rate cut only last week,
investors are fully pricing an easing of at least 75 basis
points at the next Fed meeting on March 18, while a cut to near
zero was now seen as likely by April. 0#FF:
Britain's finance minister is due to deliver his annual
budget on Wednesday and there is much talk of coordinated
stimulus with the Bank of England. The European Central Bank meets on Thursday and will be
under intense pressure to act, even though euro zone rates are
already deeply negative. "Italy's decision to quarantine the whole country will
affect 15% of Europe's GDP, putting the ECB at the forefront of
efforts to cushion the escalating economic deterioration," said
Brian Martin, a senior international economist at ANZ.
Bonds had charged ahead of the central banks to essentially
price in a global recession of unknown length.
Yields on 10-year U.S. Treasuries US10YT=RR dipped to as
little as 0.318% on Monday -- a level unthinkable just a week
ago -- but rose back to be last at 0.6818% on Tuesday amid the
stimulus chatter.
That in turn helped the dollar recoup some of its recent
hefty losses to reach 104.70 yen JPY= , edging away from
Monday's three-year trough around 101.17.
The euro eased back to $1.1350 EUR= , after climbing 1.4%
on Monday to its highest in over 13 months at $1.1492. /FRX
Asia stock markets https://tmsnrt.rs/2zpUAr4
Asia-Pacific valuations https://tmsnrt.rs/2Dr2BQA
Plunging oil, coronavirus stoke credit concerns https://tmsnrt.rs/2TBKldj
The U.S. dollar and 10-Year U.S real yields https://tmsnrt.rs/32WoiRq
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