US futures pinned to lower limit; oil drops to 17-year low

Bloomberg

US equity futures declined along with European stocks on Wednesday, retracing moves from a day earlier while bonds slumped as traders weigh the impact of fiscal and monetary stimulus to counter the effect of the coronavirus. Oil dropped to a 17-year low.
Contracts for the S&P 500 once again hit their lower trading curbs after the gauge jumped 6% on March 17. An exchange-traded fund tracking the index fell 6.9% in pre-market trading. The Stoxx Europe 600 Index also dropped, with industrial-goods and construction companies leading the decline and telecoms the only sector in the green.
Rallies fizzled out in Asia, with Japanese shares ending barely up after rising more than 4% at one point.
Yields on European bonds soared, with Italy’s jumping more than 60 basis points at one point. Treasury yields also edged up, and the dollar extended its winning streak to a seventh day while the yen also gained. Bloomberg’s industrial-metals index dropped for a third day, with copper, nickel and aluminum among the biggest losers.
Gold resumed losses as traders sold the metal to cover margin calls in other markets.
With about $1.14 trillion in fiscal support pledged or under consideration to offset the economic shock from the pandemic, investors are pricing in the risk of a surge in government borrowing. The Trump administration is moving towards a big fiscal package, while nations from the UK to France and Italy also unveiled plans to spend their way out of the crisis. Meanwhile, countries continue to ramp up measures to limit travel in a bid to contain the spreading virus.
“The missing fundamental ingredient for a sustainable recovery in risk appetite is some evidence that the growth of global Covid-19 infection rates is peaking,” said Paul O’Connor, head of multi-asset at Janus Henderson Investors. “Clearly, we are not there yet.”
The planned US stimulus could amount to $1.2 trillion, aiming to stave off the worst impact of a crisis that already looks set to plunge many of the world’s economies into recession. Meantime, the Federal
Reserve reintroduced additional crisis-era tools to stabilise financial markets. Those responses came after stresses appeared in the short-term funding markets.
“I don’t think we’re out of the woods yet in terms of liquidity,” Mark Konyn, chief investment officer at AIA Group in Hong Kong, told Bloomberg TV.
In Germany, Angela Merkel said the government will not rule out joint European Union debt issuance to help contain the impact.
Futures on the S&P 500 fell 3.7% in New York. MSCI All Country World Index dropped 1.4%. The Bloomberg Dollar Spot Index jumped 0.6%. The yen was up 0.3% at 107.33 per dollar. The euro bought $1.0986, down 0.1%. The yield on 10-year Treasuries rose three basis points to 1.11%. West Texas Intermediate crude dropped 5.8% to $25.38 a barrel.

Europe stocks plunge again with uncertainty
Bloomberg

European stocks struggled to find a floor to the current sell-off as losses resumed on virus worries after a brief respite.
The Stoxx Europe 600 Index extended its drop to 3.7% in London, tracking the retreat in Asia and US futures. The SPDR S&P 500 ETF Trust fell 5.4% in pre-market trading. All sector gauges dropped except telecom shares, while financial services, miners and industrial-goods stocks led declines. Strategists at Barclays advised that investors stay put as fear reigns about the pandemic’s spread, while
uncertainty is “likely near peak levels.”
The Stoxx 600 has slumped 35% since late February, with the bottom of the market proving elusive, as concern about the outbreak’s impact on growth and earnings has mostly overshadowed monetary and government easing measures. “Familiar hedging strategies to mitigate risks have become ineffective,” said Ostrum Asset Management strategist Axel Botte.