US equities hit limit-down; Japanese yen rebounds

Bloomberg

US equity futures tumbled by their limits and Treasuries surged at the start of what’s set to be another volatile week, with investors responding to the rapidly escalating economic hit from the coronavirus and a massive emergency move by the Federal Reserve to ease lending.
Contracts on the S&P 500, Nasdaq 100 and Dow Jones Industrial Average all sank almost 5%, tripping their market circuit breakers. Benchmark Treasury yields retreated more than 33 basis points at one point trimming the move. Bonds were mixed in Europe, where a measure of market stress hit levels not seen since the 2011-2012 euro crisis. Shares sank in Asia and Europe, where the continent is now reporting more new virus cases each day than China did at its peak as more countries lock down.
The Fed and other central banks have dramatically stepped up efforts to stabilise capital markets and liquidity, yet the moves fall short of boosting sentiment or improving the rapidly deteriorating global economic outlook. Nike Inc and Apple Inc announced mass store closings, and Fed Chairman Jerome Powell said US growth next quarter will be weak.
Investors are struggling to digest a ceaseless newsflow of companies shutting operations, countries sealing borders and governments devising targeted rescue plans. The Fed cut its key interest rate by a full percentage point to near zero and said it will boost its bond holdings by $700 billion. The Bank of Japan moved to accelerate asset purchases, at least for a time, bringing forward its decision from later this week.
“In normal circumstances, a large policy response like this would put a floor under risk assets and support a recovery,” Jason Daw, a strategist at Societe Generale SA in Singapore, wrote in a note.
“However, the size of the growth shock is becoming exponential and markets are rightfully questioning what else monetary policy can do and discounting its effectiveness in mitigating coronavirus-induced downside risks.”
The yen rebounded from March 13’s plunge after the Fed and five counterparts said they would deploy foreign-exchange swap lines. Australian equities fell almost 10%, the most since 1992, even after the Reserve Bank of Australia said it stood ready to buy bonds for the first time — an announcement that sent yields tumbling. New Zealand’s currency slumped after an emergency rate cut by the country’s central bank.
Meantime, China reported on Monday that output and retail sales tumbled in the past two months. Oil resumed its decline.
The moves from policy makers follow the worst rout in equities since the global financial crisis amid escalating risks of a recession in major economies. Over the weekend, the US extended its travel ban to more countries and cases continued to surge in Europe, while airlines are taking measures to weather the collapse in travel.
The Stoxx Europe 600 Index fell 8% in New York. Futures on the S&P 500 Index declined 4.8%. The UK’s FTSE 100 Index fell 6.2%. The MSCI Emerging Market Index dipped 4.7%. The MSCI Asia Pacific Index decreased 3.8%.
The Bloomberg Dollar Spot Index dipped 0.1%. The euro gained 0.4% to $1.1152. The British pound increased 0.1% to $1.2291. The Japanese yen strengthened 1.5% to 105.99 per dollar.
The yield on two-year Treasuries sank 18 basis points to 0.31%. The yield on 10-year Treasuries fell 21 basis points to 0.75%. The yield on 30-year Treasuries declined 13 basis points to 1.40%. Germany’s 10-year yield decreased one basis point to -0.55%. Britain’s 10-year yield fell four basis points to 0.376%.
West Texas Intermediate crude fell 5.1% to $30.12 a barrel. Gold weakened 1.4% to $1,509.02 an ounce.