Categories
Business

Asia stocks ride stimulus hopes higher but dollar left behind

TOKYO (Reuters) – Asian stocks rose on Friday as investors wagered policymakers will roll out more stimulus measures to combat the coronavirus pandemic after U.S. unemployment filings surged to a record.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.3%, while Japan’s Nikkei rose 3.88%, capping its biggest weekly gain on record. Australian shares gave up gains to fall 5.3% after a strong week.

E-Mini futures for the S&P 500 reversed course and fell 0.88% following three consecutive days of gains in the S&P 500 on Wall Street.

Pan-regional Euro Stoxx 50 futures were down 0.51%, German DAX futures fell 0.61%, and FTSE futures were down 1.31%, suggesting gains in Asian shares will not carry over into Europe.

The dollar fell against major currencies as central banks’ repeated steps to solve a dollar shortage in funding markets started to gain traction.

The U.S. House of Representatives is expected to pass a $2.2 trillion stimulus package that will flood the world’s largest economy with money to stem the damage caused by the pandemic.

The U.S. Federal Reserve has already slashed rates to zero and launched quantitative easing. The Fed will also take the unprecedented step of offering a direct backstop for corporate loans.

The United States is now the country with the most coronavirus cases, surpassing even China, where the flu-like illness first emerged late last year. Policymakers may need to offer more stimulus as the virus slams the brakes on economic activity and increases healthcare spending.

“I’m not sure what measures are left, but the reaction in stocks shows some people hoping for more stimulus thought the market was a little oversold,” said Yukio Ishizuki, FX strategist at Daiwa Securities in Tokyo.

“Currencies tell a different story. The dollar is the lead actor. The mad rush to buy dollars due to liquidity concerns is starting to fade.”

The number of Americans filing claims for unemployment benefits surged to a record of more than 3 million last week as strict measures to contain the virus pandemic ground the country to a sudden halt, data showed on Thursday.

The jobless blowout was announced shortly after Fed Chairman Jerome Powell said the United States “may well be in recession”, an unusual acknowledgement by a Fed chair that the economy may be contracting even before data confirms it.

Global equity markets took the data in their stride, partly as most central banks have already aggressively eased policy and governments are backing this up with big fiscal spending.

Chinese shares, battered this month because of the virus, rose 0.32% on Friday. Shares in South Korea, another country hit hard by the pandemic, rose 1.87%.

Leaders of the Group of 20 major economies pledged on Thursday to inject over $5 trillion into the global economy to limit job and income losses from the coronavirus.

CURRENCY MARKET

In the currency market, the greenback fell 0.94% to 108.58 yen in Asia, on pace for a 2% weekly decline.

The dollar was also headed for steep weekly declines against the Swiss franc, pound, and euro.

The U.S. currency’s fall after two weeks of gains suggests the Fed’s efforts to relieve a crunch in the dollar funding market are working, some analysts said.

The yield on benchmark 10-year Treasury notes fell to 0.7948%, while the two-year yield edged up to 0.2809%.

Yields were headed for a weekly decline, taking cues from the Fed’s extraordinary steps to bolster markets and the huge stimulus package.

U.S. crude ticked up 1.64% to $22.97 a barrel, but Brent crude fell 0.19% to $26.29. Energy markets have been caught in a tug-of-war between falling fuel demand, hopes for stimulus spending and worries about excess oil supplies.

Gold, normally bought as a safe haven, was slightly lower. Spot gold fell 0.5% to $1,623.40 per ounce.

Gold market participants remained concerned about a supply squeeze after a sharp divergence between prices in London and New York. The virus has grounded planes used to transport gold and closed precious metal refineries.

Source: Read Full Article

Categories
Business

Asia shares rise on more stimulus hopes but dollar loses steam

TOKYO (Reuters) – Asian stocks rose on Friday as investors wagered policymakers will roll out more stimulus measures to combat the coronavirus pandemic after U.S. unemployment filings surged to a record.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.8%. Australian shares gave up gains to fall 4.55% after a strong week, but Japan’s Nikkei rose 1.92%.

E-Mini futures for the S&P 500 reversed course and fell 1.58% in Asia following three consecutive days of gains in the S&P 500 on Wall Street.

Pan-regional Euro Stoxx 50 futures were down 1.41% , German DAX futures fell 1.38%, and FTSE futures were down 2.21% , suggesting gains in Asian shares will not carry over into Europe.

The dollar fell against major currencies as central banks’ steps to solve a dollar shortage in funding markets started to gain traction.

The U.S. House of Representatives is expected to pass a $2.2 trillion stimulus package that will flood the world’s largest economy with money to stem the damage caused by the pandemic.

The U.S. Federal Reserve has already slashed rates to zero and launched quantitative easing. The Fed will also take the unprecedented step of offering a direct backstop for corporate loans.

The United States is now the country with the most coronavirus cases, surpassing even China, where the flu-like illness first emerged late last year. Policymakers may need to offer more stimulus as the virus slams the brakes on economic activity and increases healthcare spending.

“I’m not sure what measures are left, but the reaction in stocks shows some people hoping for more stimulus thought the market was a little oversold,” said Yukio Ishizuki, FX strategist at Daiwa Securities in Tokyo.

“Currencies tell a different story. The dollar is the lead actor. The mad rush to buy dollars due to liquidity concerns is starting to fade.”

The number of Americans filing claims for unemployment benefits surged to a record of more than 3 million last week as strict measures to contain the virus pandemic ground the country to a sudden halt, data showed on Thursday.

The jobless blowout was announced shortly after Fed Chairman Jerome Powell said the United States “may well be in recession”, an unusual acknowledgement by a Fed chair that the economy may be contracting even before data confirms it.

Global equity markets took the data in their stride, partly as most central banks have already aggressively eased policy and governments are backing this up with big fiscal spending.

Chinese shares, battered this month because of the virus, rose 1.6% on Friday. Shares in South Korea, another country hit hard by the pandemic, rose 0.42%.

Leaders of the Group of 20 major economies pledged on Thursday to inject over $5 trillion into the global economy to limit job and income losses from the coronavirus.

CURRENCY MARKET

In the currency market, the greenback fell 1.16% to 108.34 yen in Asia, on pace for a 2.2% weekly decline.

The dollar was also headed for steep weekly declines against the Swiss franc, pound, and euro.

The U.S. currency’s fall after two weeks of gains suggests the Fed’s efforts to relieve a crunch in the dollar funding market are working, some analysts said.

The yield on benchmark 10-year Treasury notes fell in Asia to 0.7979%, while the two-year yield edged up to 0.2829%.

Yields were headed for a weekly decline, taking cues from the Fed’s extraordinary steps to bolster markets and the huge stimulus package.

U.S. crude rose 2.04% to $23.06 a barrel. Brent crude rose 0.84% to $26.56 per barrel. Energy markets have been caught in a tug-of-war between hopes for stimulus spending and worries about excess oil supplies.

Gold, normally bought as a safe haven, was slightly lower. Spot gold fell 0.34% to $1,626.01 per ounce.

Gold market participants remained concerned about a supply squeeze after a sharp divergence between prices in London and New York. The virus has grounded planes used to transport gold and closed precious metal refineries.

Source: Read Full Article

Categories
Business

Take Five: Quarter-life crisis

(Reuters) – 1/GIVE NO QUARTER

Few will regret the end of the first 2020 quarter. Fears of a U.S.-Iran war gave way to the coronavirus pandemic which JPMorgan reckons will have pushed the world economy into a 12% contraction over January to March. The quarter saw the most brutal global equity collapse since the Great Depression, exacerbated by a 60% oil price slump.

April may not bring much relief, with coronavirus still spreading rapidly and keeping large parts of the global economy shuttered. Banks have rushed to slash Q2 forecasts too, so expect more turbulence on financial markets.

The cavalry has arrived though. G20 governments have promised a $5 trillion revival effort, major central banks have slashed rates and restarted asset purchases. Markets have bounced big and may actually end Q1 on a high. What we need now is to see infection rates peaking and that will show whether April falls, or if it’s indeed time for spring.

(Graphic: World stocks vs. COVID-19 confirmed cases, here)

2/PANDEMIC PAYROLLS:

Through years of stubbornly low economic growth and inflation, the brightest spot was the U.S. labour market, with unemployment reaching half-century lows. Coronavirus may have ended that boom.

With infections surging, cities in lockdown, businesses downing shutters and most travel on ice, staff layoffs are likely to mushroom. That showed up in the number of Americans filing unemployment benefit claims which hit a record of more than 3 million. Economists polled by Reuters had forecast claims would rise to 1 million, though some estimates were as high as 4 million.

Now the wait is on for Friday’s non-farm payrolls figures that will offer a snapshot of the jobs picture over March. The government’s unprecedented $2 trillion fiscal expansion package includes a $500 billion fund to help hard-hit industries and a comparable amount to fund direct payments of up to $3,000 apiece to U.S. families.

Economists expect the payroll data to show a loss of 293,000 jobs – the largest monthly drop since July 2009. A significant overshoot of that and the $2 trillion stimulus approved by Congress could suddenly start to look inadequate.

(Graphic: Pandemic payrolls, here)

3/CHINA’S PYRRHIC VICTORY

The world’s factory is re-opening, but the market is closed and the shoppers are gone.

China’s social isolation policies appear to have contained the coronavirus at home, allowing work and travel to resume. But major economic damage may be yet to come. With infections climbing exponentially in the United States, Europe and the other markets China exports to, and with supply chains in disarray, China is getting neither the imported components it needs nor demand for its products.

Already Chinese factories’ Jan-Feb profits have hit their lowest in a decade and upcoming manufacturing surveys will very likely reveal more pain. And just like everywhere else, job losses are mounting up, regardless of how many cheap loans are being offered to businesses. Expectations are now for the economy to contract this quarter but many economists reckon 2020 growth will be around 2% – a third of the “around 6%” authorities target.

(Graphic: China’s Industrial profits shrinking, here)

4/COME TOGETHER, RIGHT NOW

The European Central Bank has done its bit to tackle the virus damage, having massively expanded asset purchases, agreed to more flexibility on the share of bonds it buys from each country and buffered borrowing costs for weaker euro zone states such as Italy. Now it’s up to European Union leaders to come together.

So far there is no united front: they’ve failed to agree on the scale of support for economies ravaged by the outbreak. The ECB’s aggressive action gives them some breathing space but, as of now, politicians are wrangling over setting up a credit line worth some 2% of annual output from the euro area bailout fund.

Many European governments urge the issuance of a joint debt instrument to face a crisis which Goldman Sachs economists estimate may shrink the euro economy by 9% this year. But Germany and some others oppose that. At stake, says France’s Emmanuel Macron, is the survival of the European project. The crisis, for sure, is far from over.

(Graphic: 10-year bond yield spreads over Germany, here)

5/FRONTIERS ON THE EDGE

It’s been a tough time for riskier assets in recent weeks, including emerging market stocks, bonds and currencies. But few have felt the pain as much as frontier markets, a subset of smaller and often riskier emerging economies.

Many of those frontier economies are in Africa, and are suffering from a toxic combination of tumbling oil and commodity prices, the prospect of the global economy tumbling into recession and weakening currencies which will make servicing external debt ever-more expensive.

Oil-producing countries like Angola, Ghana, Gabon and Nigeria have seen their dollar-denominated debt drop sharply, with yields of some issues shooting above 20%, indicating soaring borrowing costs. Many countries on the continent lack the financial firepower or foreign currency reserves needed to combat the coronavirus and prop up their economies, with healthcare systems already under strain.

The World Bank and International Monetary Fund on Wednesday urged official bilateral creditors to provide immediate debt relief to the world’s poorest countries as they grapple with the human and economic consequences of the pandemic.

Leaders of the Group of 20 major economies pledged on Thursday to inject over $5 trillion into the global economy to limit job and income losses from the coronavirus and “do whatever it takes to overcome the pandemic”, expressing concern about Africa in particular. Many hope that the acknowledgement of the need to bolster global financial safety nets and national health systems will translate into action.

(Graphic: Africa’s soaring borrowing costs, here)

Source: Read Full Article

Categories
Business

Asia shares rise on more stimulus hopes but dollar loses steam

TOKYO (Reuters) – Asian stocks rose on Friday as investors wagered policymakers will roll out more stimulus measures to combat the coronavirus pandemic after U.S. unemployment filings surged to a record.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 1.2%. Australian shares gave up gains to fall 1.09%, but Japan’s Nikkei rose 1.44%.

E-Mini futures for the S&P 500 reversed course and fell 0.95% in Asia following three consecutive days of gains in the S&P 500 on Wall Street.

The dollar nursed losses against major currencies as central banks’ steps to solve a dollar shortage in funding markets started to gain traction.

The U.S. House of Representatives is expected to pass a $2 trillion stimulus package later on Friday that will flood the world’s largest economy with money to stem the damage caused by the pandemic.

The U.S. Federal Reserve has already slashed rates to zero and launched quantitative easing. The Fed will also take the unprecedented step of offering a direct backstop for corporate loans.

The United States is now the country with the most coronavirus cases, surpassing even China, where the flu-like illness first emerged late last year. Policymakers may need to offer more stimulus as the virus slams the brakes on economic activity and increases healthcare spending.

“I’m not sure what measures are left, but the reaction in stocks shows some people hoping for more stimulus thought the market was a little oversold,” said Yukio Ishizuki, FX strategist at Daiwa Securities in Tokyo.

“Currencies tell a different story. The dollar is the lead actor. The mad rush to buy dollars due to liquidity concerns is starting to fade.”

The number of Americans filing claims for unemployment benefits surged to a record of more than 3 million last week as strict measures to contain the virus pandemic ground the country to a sudden halt, data showed on Thursday.

The jobless blowout was announced shortly after Fed Chairman Jerome Powell said the United States “may well be in recession”, an unusual acknowledgement by a Fed chair that the economy may be contracting even before data confirms it.

Global equity markets took the data in their stride, partly as most central banks have already aggressively eased policy and governments are backing this up with big fiscal spending.

Chinese shares, battered this month because of the virus, rose 0.8% on Friday. Shares in South Korea, another country hit hard by the pandemic, jumped by 1.62%.

Leaders of the Group of 20 major economies pledged on Thursday to inject over $5 trillion into the global economy to limit job and income losses from the coronavirus.

CURRENCY MARKET

In the currency market, the greenback fell 0.89% to 108.64 yen in Asia, on pace for a 2% weekly decline.

The dollar was also headed for weekly declines against the Swiss franc, pound, and euro.

The U.S. currency’s fall after two weeks of gains suggests that the Fed’s efforts to relieve a crunch in the dollar funding market are working, some analysts said.

The yield on benchmark 10-year Treasury notes rose slightly in Asia to 0.8160%, while the two-year yield edged up to 0.2809%.

Yields were still headed for a weekly decline, taking cues from the Fed’s extraordinary steps to bolster markets and the $2 trillion stimulus package.

U.S. crude ticked up 2.08% to $23.07 a barrel. Brent rose 1.14% to $26.64 per barrel. Energy markets have been caught in a tug-of-war between hopes for stimulus spending and worries about excess oil supplies.

Gold, normally bought as a safe haven, was slightly lower. Spot gold fell 0.44% to $1,626.16 per ounce.

Gold market participants remained concerned about a supply squeeze after a sharp divergence between prices in London and New York. The virus has grounded planes used to transport gold and closed precious metal refineries.

Source: Read Full Article

Categories
Economy

CEE MARKETS-Czech crown extends losses after sharp rate cut, other assets mixed

 (Updates markets, adds Czech rates and bond tender)
    BUCHAREST, March 26 (Reuters) - The Czech crown extended
losses after the central bank cut interest rates more than
expected on Thursday while the country's finance ministry sold
huge amounts in debt tenders for a second day as it ramps up
borrowing amid the coronavirus outbreak.
    Other currencies and stocks across the region were mixed,
with investors caught between fears of a global recession and
hopes of stimulus measures.
    The Czech National Bank cut its main interest rate by 75
basis points, following a surprise cut it delivered last week.

    The Czech, Polish and Romanian central banks have cut their
benchmark rates and announced further measures to shore up
economic activity damaged by restrictions and closures aimed at
curbing the coronavirus outbreak.
    A wide majority of analysts polled by Reuters had expected
Czech policymakers to cut rates by half a percentage point.

    "As the impact of the coronavirus crisis on economic
activity becomes clearer, we expect the central bank to deliver
another 50bp rate cut to near-zero over the coming months and
possibly commence sovereign bond purchases," Capital Economics
said in a statement.
    By 1330 GMT, the Czech crown extended losses to
trade 0.4% lower against the euro at 27.5850. 
    Analysts see a chance that the central bank could be active
in the secondary debt market after legislation widening the
assets it can buy - currently limited to maturities of up to one
year - goes through parliament next month.
    On Thursday, the Czech finance ministry sold a massive 68.56
billion crowns ($2.74 billion) in 52-week Treasury bills,
meeting most demand for the short-term paper a day after seeing
record bids at an auction for state bonds. 
    "People are looking to offload cash in anticipation of (the
central bank) easing during the year," a trader said in
reference to the T-bill result.
    Elsewhere in the region, the Hungarian forint was
down 0.3% against the euro at 355.0500. 
    Hungary may have to raise its budget deficit target this
year as the government revises its 2020 budget to cope with the
coronavirus outbreak, finance minister Mihaly Varga said on
Thursday.
    Hungary has kept is budget deficit well below the European
Union's limit - 3% of gross domestic product - in recent years
as Viktor Orban's government worked to wrestle down some of the
largest debt in central Europe.
    "The 2020 Hungarian budget has substantial reserves, so we
have resources to tap now as trouble has reared its head," 
Varga said in a post on his Facebook page on Thursday.
    "However, if this is not enough, sticking staunchly to a
deficit below 3% would be a mistake."
    The Monetary Council left interest rates on hold on Tuesday
and moved to pump more money into the banking system by
introducing a massive fixed-rate collateralised loan instrument.

    It provided 43.1 billion forints ($132.06 million) worth of
funds to banks at its first collateralised loan tender on
Wednesday, offering liquidity to banks at a fixed rate of 0.9%,
it said.
    Romania, too, was likely to raise its deficit target at a
budget revision in April, its finance minister said, but unlike
its Hungarian neighbour, Bucharest is already running a deficit
above EU limits, leaving it more vulnerable to investor flight.
    On Thursday, the ministry said it plans to tap foreign
markets for further issues worth 10 billion euros ($10.9
billion) by 2022.
    The Romanian leu was flat against the euro, while
the Polish zloty reversed course to trade 0.2% higher
versus the euro at 4.5650.
    The Polish central bank bought back treasury bonds worth
over 10 billion zlotys ($2.41 billion) at its third buyback
operation.
    Prague's bluechip index fell 1.0% on the day, while
Bucharest's was flat and Hungary and Poland's
 rose 0.7% and 1.0%, respectively.    
    
            CEE       SNAPSHO   AT                      
            MARKETS   T        1404              
                               CET               
                      CURRENC                           
                      IES                        
                      Latest   Previou  Daily    Change
                               s                 
                      bid      close    change   in 2020
 Czech      <EURCZK=  27.5850  27.4690   -0.42%   -7.80%
 crown      >                                    
 Hungary    <EURHUF=  355.050  353.920   -0.32%   -6.73%
 forint     >               0        0           
 Polish     <EURPLN=   4.5650   4.5726   +0.17%   -6.76%
 zloty      >                                    
 Romanian   <EURRON=   4.8330   4.8350   +0.04%   -0.92%
 leu        >                                    
 Croatian   <EURHRK=   7.6095   7.6119   +0.03%   -2.16%
 kuna       >                                    
 Serbian    <EURRSD=  117.400  117.460   +0.05%   +0.14%
 dinar      >               0        0           
 Note:      calculated from             1800            
 daily                                  CET      
 change                                          
                                                        
                      Latest   Previou  Daily    Change
                               s                 
                               close    change   in 2020
 Prague                798.64  807.650   -1.12%  -28.41%
                                     0           
 Budapest             32952.2  32690.4   +0.80%  -28.49%
                            2        5           
 Warsaw               1456.09  1441.83   +0.99%  -32.28%
 Bucharest            7615.45  7621.00   -0.07%  -23.67%
 Ljubljana  <.SBITOP   725.27   727.51   -0.31%  -21.67%
            >                                    
 Zagreb               1428.83  1423.61   +0.37%  -29.18%
 Belgrade   <.BELEX1   638.63   629.80   +1.40%  -20.34%
            5>                                   
 Sofia                 421.29   426.13   -1.14%  -25.85%
                                                        
                      Yield    Yield    Spread   Daily
                      (bid)    change   vs Bund  change
                                                 in
 Czech                                           spread
 Republic                                        
   2-year   <CZ2YT=R   1.0580  -0.1640   +167bp   -15bps
            R>                                s  
   5-year   <CZ5YT=R   1.4620   0.0230   +199bp    +8bps
            R>                                s  
   10-year  <CZ10YT=   1.7910   0.1730   +213bp   +22bps
            RR>                               s  
 Poland                                                 
   2-year   <PL2YT=R   0.9130  -0.0620   +153bp    -5bps
            R>                                s  
   5-year   <PL5YT=R   1.2620  -0.0540   +179bp    +0bps
            R>                                s  
   10-year  <PL10YT=   1.7750  -0.0730   +212bp    -2bps
            RR>                               s  
            FORWARD                                     
                      3x6      6x9      9x12     3M
                                                 interba
                                                 nk
 Czech Rep               0.62     0.47     0.41     1.72
            <PRIBOR=                             
            >                                    
 Hungary                 0.33     0.35     0.35     0.47
                                                 
 Poland                  0.68     0.51     0.48     1.17
                                                 
 Note: FRA  are for ask                                 
 quotes     prices                               
 **********************************************         
 ****************                                
 

($1 = 4.1526 zlotys)

 (Reporting by Luiza Ilie in Bucharest, Jason Hovet in Prague,
Alan Charlish in Warsaw and Anita Komuves in Budapest; editing
by Larry King and Susan Fenton)
  
 
 

Source: Read Full Article

Categories
Economy

CEE MARKETS-Currencies weaker, Czech central bank seen cutting rates

    BUCHAREST, March 26 (Reuters) - Central European currencies
weakened against the euro on Thursday as fears of a global
recession overtook stimulus measures, while the Czech central
bank was expected to further cut interest rates.
    Analysts polled by Reuters widely expect The Czech National
Bank to cut rates by another 50 basis points later on Thursday,
following another half-percentage-point cut earlier this month,
as it seeks to soften the economic blow from the coronavirus
outbreak.
    Questions remain on the central bank's next moves as markets
price in aggressive rate cuts in the months ahead. CSOB analysts
said the bank is unlikely to be as aggressive. 
    "Quick moves could start new volatility amid low liquidity
and quicken the outflow of capital abroad," the bank said.
    Markets also see chances the central bank could be active in
the secondary market after legislation widening the assets it
can buy - currently limited to maturities of up to one year -
goes through parliament next month.
    "EUR/CZK price action will fully depend on how the central
bank will or will not communicate the QE," ING bank said in a
statement.
    By  0910 GMT, the Czech crown traded 0.2 percent
down against the euro at 27.5300.
    So far, potential quantitative easing plans have supported
markets, and analysts said they helped boost demand at a state
bond auction on Wednesday, where several times more debt than
planned was sold.
    Elsewhere in the region, the Hungarian forint was
down 0.5% against the euro at 355.7800. 
    Hungary may have to raise its budget deficit target this
year as the government revises its 2020 budget to cope with the
coronavirus outbreak, the finance minister said on Thursday.
    Hungary has kept is budget deficit well below the European
Union's limit -- 3% of gross domestic product -- in recent years
as Orban's government worked to wrestle down some of the largest
debt in central Europe.
    "The 2020 Hungarian budget has substantial reserves, so we
have resources to tap now as trouble has reared its head," 
Mihaly Varga said in a post on his Facebook page on Thursday.
    "However, if this is not enough, sticking staunchly to a
deficit below 3% would be a mistake."
    The Monetary Council left interest rates on hold on Tuesday
and moved to pump more money into the banking system by
introducing a massive fixed-rate collateralised loan instrument.

    It provided 43.1 billion forints ($132.06 million) worth of
funds to banks at its first collateralised loan tender on
Wednesday, offering liquidity to banks at a fixed rate of 0.9%,
it said.
    The Czech, Polish and Romanian central banks have cut their
benchmark rates and announced further measures to shore up
economic activity. 
    Romania too was likely to raise its deficit target at a
budget revision in April, the finance minister said, but unlike
its Hungarian neighbour, Bucharest is already running a deficit
above EU limits, leaving it more vulnerable to investor flight.
    On Thursday, the ministry said it plans to tap foreign
markets for further issues worth 10 billion euros ($10.9
billion) by 2022.
    The Romanian leu was down 0.1% versus the euro, as
was the Polish zloty, which traded at 4.5773.
    Poland's central bank will carry out its third treasury bond
buy-back operation later on Thursday.
    
            CEE       SNAPSHO   AT                      
            MARKETS   T        0950              
                               CET               
                      CURRENC                           
                      IES                        
                      Latest   Previou  Daily    Change
                               s                 
                      bid      close    change   in 2020
 Czech      <EURCZK=  27.5300  27.4690   -0.22%   -7.62%
 crown      >                                    
 Hungary    <EURHUF=  355.780  353.920   -0.52%   -6.92%
 forint     >               0        0           
 Polish     <EURPLN=   4.5773   4.5726   -0.10%   -7.01%
 zloty      >                                    
 Romanian   <EURRON=   4.8377   4.8350   -0.06%   -1.02%
 leu        >                                    
 Croatian   <EURHRK=   7.6060   7.6119   +0.08%   -2.11%
 kuna       >                                    
 Serbian    <EURRSD=  117.420  117.460   +0.03%   +0.13%
 dinar      >               0        0           
 Note:      calculated from             1800            
 daily                                  CET      
 change                                          
                                                        
                      Latest   Previou  Daily    Change
                               s                 
                               close    change   in 2020
 Prague                801.85  807.650   -0.72%  -28.13%
                                     0           
 Budapest             32882.2  32690.4   +0.59%  -28.65%
                            4        5           
 Warsaw               1443.87  1441.83   +0.14%  -32.85%
 Bucharest            7598.80  7621.00   -0.29%  -23.84%
 Ljubljana  <.SBITOP   720.90   727.51   -0.91%  -22.14%
            >                                    
 Zagreb               1408.33  1423.61   -1.07%  -30.19%
 Belgrade   <.BELEX1   641.67   629.80   +1.88%  -19.96%
            5>                                   
 Sofia                 423.66   426.13   -0.58%  -25.43%
                                                        
                      Yield    Yield    Spread   Daily
                      (bid)    change   vs Bund  change
                                                 in
 Czech                                           spread
 Republic                                        
   2-year   <CZ2YT=R   1.2350   0.0120   +183bp    +1bps
            R>                                s  
   5-year   <CZ5YT=R   1.5210   0.0810   +202bp   +10bps
            R>                                s  
   10-year  <CZ10YT=   1.8300   0.2110   +214bp   +23bps
            RR>                               s  
 Poland                                                 
   2-year   <PL2YT=R   0.9030  -0.0720   +150bp    -8bps
            R>                                s  
   5-year   <PL5YT=R   1.2830  -0.0330   +178bp    -1bps
            R>                                s  
   10-year  <PL10YT=   1.8040  -0.0440   +211bp    -3bps
            RR>                               s  
            FORWARD                                     
                      3x6      6x9      9x12     3M
                                                 interba
                                                 nk
 Czech Rep               0.62     0.47     0.41     1.74
            <PRIBOR=                             
            >                                    
 Hungary                 0.32     0.29     0.31     0.50
                                                 
 Poland                  0.61     0.48     0.47     1.17
                                                 
 Note: FRA  are for ask                                 
 quotes     prices                               
 **********************************************         
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 (Reporting by Luiza Ilie in Bucharest, Jason Hovet in Prague,
Alan Charlish in Warsaw and Anita Komuves in Budapest; editing
by Larry King)
  
 
 

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Business

Investors look to 2008 for guidance on when to jump back in

LONDON (Reuters) – Investment banks are dusting off models from the 2008 financial crisis to gauge the right time to buy back into stock markets that have plunged 30% from their February record highs because of the coronvirus crisis.

That inflection point is not easy to model when the virus is still spreading rapidly across Europe and the United States.

But the U.S. government’s $2 trillion in fiscal stimulus, coming on top of unprecedented measures from the U.S. Federal Reserve and other central banks on Tuesday triggered one of the sharpest global equity market rallies in decades.

Wall Street’s so-called fear gauge, the Cboe Volatility Index has also fallen from its highs.

For some, the signals for a reversal are in place.

Veteran investor Bill Ackman told investors in his listed Pershing fund he had turned increasingly positive on stocks and credit, and taken off hedges he put in place in early March when markets first started cratering.

He said Pershing was “redeploying our capital in companies we love at bargain prices that are built to withstand this crisis”.

Goldman Sachs’ view was that this week’s record stock market rally had been led by “underweight” sectors, suggesting many funds had been covering short positions. Indeed, energy, travel and auto stocks were Tuesday’s biggest gainers.

At Morgan Stanley, Andrew Sheets, head of cross-asset strategy, said in these situations, including in 2008, markets often trough well before the crisis actually ends.

From the 2008 trough there followed a decade of stunning gains that added more than $25 trillion to global equity value.

“(The market) won’t need to see a peak in U.S. (Covid) cases, it just needs to see some confirmation of the path and it nees to be happy with the path,” Sheets said.

But so far he remains underweight credit and has only marginally upped equity exposure.

GETTING IT RIGHT

JPMorgan says there is more than one way of measuring it, especially given the unique nature of the crisis which hit the real economy first, with financial markets following.

John Normand, JPM’s head of cross-asset strategy said one model suggested now is the time to re-enter — a quarter before a recession is likely to end. His view is that the coronavirus-induced recession will be “undoubtedly deep but also possibly the shortest-ever.”

Normand also said investors could wait for “green shoots” or evidence of an actual upturn — reflected in a trough for JPMorgan’s global Purchasing Managers Index.

A third, valuation-based model triggers a “Buy” signal when risk-premia across several asset classes fall to certain “deep value” thresholds.

Norman said the latter two models were not yet signalling it was time to buy.

Notably, U.S. and European stock valuations based on a 12-month forward price-to-earnings ratios now have dipped well below historical averages, according to Refinitiv data.

Meanwhile, credit markets are still sending out distress signals — yields on junk-rated U.S. bonds are around 10% currently compared to 6% a month ago, meaning many companies may find it hard to service debt.

In Europe, an index of European credit default swaps, ITEXO5Y=MG that measure the default risk of a basket of sub-investment grade companies, is off its peaks but remains elevated at around 520 basis points, almost double end-February levels.

The volatility index’s (VIX) 30% drop from recent peaks is a clear positive for riskier assets. But if 2008 is any guide, its decline may not yet signal the market trough. In 2008, the VIX retreated from highs in October, but markets took another five months to bottom out.

The recession in 2008 was a long one — some economists reckon this time a turnaround in global growth will come by the third quarter.

Yet some also warn that markets are only now coming to grips with how severe a potential downturn could be.

“We … haven’t fully appreciated how far this recession will go,” said Andrea Cicione, head of strategy at TS Lombard, in London. Some of her concerns center on potential second-round effects such as rising unemployment and companies slashing their capital expenditures.

For now, the trajectory of the coronavirus and its economic fallout will play a key role in determining the market’s path, said Randy Watts, chief investment strategist at William O’Neill+Co.

“In the short run, the market is still going to stay very volatile until one of three things happens – either the number of deaths and the number of new infections in the U.S., peak, there is some kind of a cure or vaccine developed or until the U.S. economy begins to reopen,” he said.

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Economy

GLOBAL MARKETS-Stocks rebound further as markets await $2 trln U.S. stimulus boost

(Adds remarks, fresh pricing)

* MSCI world index adds to biggest climb since 2008 crisis

* Wall Street also on track for back-to-back gains

* Gold retain most of advance after big jump

* Dollar rises as markets wait for U.S. stimulus package

* Graphic: World FX rates in 2020 tmsnrt.rs/2egbfVh

By Herbert Lash and Marc Jones

NEW YORK/LONDON, March 25 (Reuters) – The dollar and global equity markets marched higher on Wednesday and were poised for a second day of gains following a coronavirus-induced selloff, though investors remained concerned about the pandemic’s economic impact.

Hopes that an incoming $2 trillion U.S. fiscal stimulus will ease the economic devastation caused by virus lockdowns lifted world equity indexes for a second day after historic gains on Tuesday, but investors refrained from calling a bottom.

Europe’s main markets in London, Frankfurt and Paris were struggling to stay positive after ripping 4%-5% higher and oil prices swung from 3% up to 3% down. Wall Street also teetered though it mostly remained more than 1% higher.

The Dow Jones Industrial Average soared more than 11% on Tuesday in its biggest single-day percentage gain since 1933 and the benchmark S&P 500 jumped 9.4% – its tenth best day on record out of 24,067 trading sessions since a daily data series started in 1927.

The stimulus package marks progress but the devil’s in the details, said Ron Temple, head of U.S. equity at Lazard Asset Management in New York. The legislation is not available to read to know how it will be executed or when money arrives at households and small businesses gain access to funding, he said.

“This is not the all-clear, it’s just material progress,” Temple said.

“Until we know we can go back to work safely, that we can go to restaurants and go to stores and engage with other humans in close proximity, I don’t think you can make an economic or a market call. It’s premature to be trying to call the bottom.”

The stimulus includes a $500 billion fund to help hard-hit industries and a comparable amount for direct payments of up to $3,000 apiece to millions of U.S. families.

It will also include $350 billion for small-business loans, $250 billion for expanded unemployment aid and at least $100 billion for hospitals and related health systems.

U.S. senators will vote Wednesday. Top aides to Republican President Donald Trump and senior Republican and Democrat senators agreed on the unprecedented bill, which amounts to nearly half the $4.7 trillion the U.S. government spends annually, after five days of marathon talks.

Data pointed to a fast-slowing economy that analysts said signaled the United States already was in recession.

New orders for key U.S.-made capital goods fell sharply in February as demand for machinery and other products slumped, suggesting a deepening contraction in business investment.

The benchmark S&P 500 is still nearly $8 trillion below its mid-February high, and investors expect more sharp swings. Wall Street’s fear gauge eased overnight but was on the rise again ahead of Wednesday’s open.

MSCI’s gauge of stocks across the globe surged 2.65% and emerging market stocks rose 4.32%.

The pan-European STOXX 600 index rose 0.96%.

The Dow Jones Industrial Average rose 661.9 points, or 3.2%, to 21,366.81. The S&P 500 gained 35.76 points, or 1.46%, to 2,483.09 and the Nasdaq Composite added 34.47 points, or 0.46%, to 7,452.33.

In the currency markets, the dollar slipped for a third straight session as a scramble for liquidity was soothed by the super-sized U.S. stimulus plan, though it was starting to look a little stronger again.

The dollar index fell 0.216%, with the euro up 0.44% to $1.0834. The Japanese yen weakened 0.24% versus the greenback at 111.51 per dollar.

The risk-sensitive Australian dollar jumped over the 60-U.S. cent mark for the first time in a week.

Bond markets were also calmer. Benchmark U.S. Treasuries were yielding 0.7987% while in Europe Germany’s 10-year yield edged a basis point higher to -0.296%, tailed by other higher-rated government debt.,

European Central Bank chief Christine Lagarde asked euro zone finance ministers during a videoconference on Tuesday to seriously consider a one-off joint debt issue of “coronabonds”, officials told Reuters.

In metals markets, gold changed hands at $1,608.78 an ounce , retaining most of Tuesday’s gains of almost 5%, its biggest jump since 2008.

Oil prices fell despite the massive pending U.S. economic stimulus package as the coronavirus pandemic hurt U.S. fuel demand, with traders bracing for further declines.

Brent crude was down 17 cents, or 0.6%, to $26.98 a barrel. U.S. crude futures fell 21 cents, or 0.9%, to $23.80 a barrel. (Reporting by Herbert Lash; Editing by Bernadette Baum)

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Business

Asia rides Wall Street surge as investors place hopes on U.S. stimulus

TOKYO (Reuters) – Asian shares extended their rally on Wednesday in the wake of Wall Street’s massive rebound as the U.S. Congress appeared closer to passing a $2 trillion stimulus package to mitigate the economic blow from the coronavirus pandemic.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose 1.7% with Australian shares jumping 3.4% and South Korean shares .KS11 gaining 3.5%. Japan’s Nikkei .N225 surged 4.8%.

“Japanese shares have been bolstered by aggressive buying from the Bank of Japan and pension money this week. That has prompted hedge funds to cover their short positions,” said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities.

On Tuesday, MSCI’s gauge of stocks across the globe .MIWD00000PUS rallied 8.39%, the largest single-day gain since the wild swings seen during the height of the global financial crisis in October 2008. It rose another 0.8% in Asia on Wednesday.

On Wall Street, the Dow Jones Industrial Average .DJI soared 11.37%, its biggest one-day percentage gain since 1933.

Yet, much of the large gains in stock markets pale in comparison with the brutal selloff of the past few weeks as investors braced for a deep global recession in the wake of sweeping lockdowns in many countries.

U.S. S&P500 is still down almost 28% from its record peak hit just over a month ago. Wall Street futures EScv1 were down 1.1% in early Asian trade.

“Many analysts have recently put out dire economic forecasts, like annualized rate of 20% fall in U.S. GDP next quarter. Europe and Japan should also see double-digit contractions,” said Nobuhiko Kuramochi, chief strategist at Mizuho Securities.

“I suspect the outlooks have sunk in among market players already and that the bear market has run about 80% of its course for now.”

Senior Democrats and Republicans in the divided U.S. Congress said on Tuesday they were close to a deal on a $2 trillion stimulus package to limit the economic damage from coronavirus pandemic. But it was unclear when they would be ready to vote on a bill.

Investor fears about a sharp economic downturn appear to be easing somewhat after the U.S. Federal Reserve’s offer of unlimited bond-buying and programs to buy corporate debt.

“Companies will see their revenues sink and indebted firms will have trouble securing cash, so governments are making the right responses,” said Akira Takei, senior fund manager at Asset Management One.

“The question is, while those responses are necessary in the near term, what if this continues? You can’t keep helping companies that continue to make losses. The longer this drags on, the more likely we will need to adjust to a new normal.”

The biggest uncertainty is on how countries can slow the pandemic and how quickly they can lift various curbs on economic activity.

U.S. President Donald Trump pressed his case for a re-opening of the U.S. economy by mid-April.

But that met immediate scepticism given the rise of infections in the United States is now among the highest in the world, with the total cases reaching more than 50,000, doubling in less than 3 days recently.

In particular, its financial hub of New York City suffered another quick and brutal rise in the number of infections to around 15,000, raising worries about shortage of hospital beds.

In the currency market, the dollar has slipped as a greenback liquidity crunch loosened slightly.

The euro traded at $1.0808 EUR= up 0.15% after four straight days of gains.

The dollar dropped 0.3% against the yen to 110.85

JPY=, off a one-month high of 111.715 touched the previous day.

Gold ticked up 0.3% to $1,614.5 per ounce XAU= after having soared almost 5%, its biggest gains since 2008, on Tuesday. It was in part helped by concerns lockdowns in major producer South Africa could disrupt supply.

Oil prices bounced back as hopes for U.S. stimulus offset fears of falling global demand.

India, the world’s third largest oil consumer, ordered its 1.3 billion residents to stay home for three weeks, the latest big fuel user to announce restrictions on social movement, which have destroyed demand for gasoline and jet fuel worldwide.

The market remained pressured by a flood of supply after Saudi Arabia started a price war earlier this month, a move that dealt a crushing blow to markets already reeling from the pandemic.

U.S crude futures CLc1 rose 4.5% to $25.10 per barrel. That is up about $5.5, or almost 26%, from their 18-year intraday low of $19.46 touched on Friday. Still on the month, the market is down 44%.

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Business

Boundless Fed bond-buying fuels stocks rebound, dollar recoils

LONDON (Reuters) – Financial markets rebounded on Tuesday, with stocks and oil jumping about 4% in Europe, while the safe-haven dollar recoiled as unprecedented global stimulus efforts gained traction.

Although the U.S. Federal Reserve’s offer of unlimited bond-buying was not expected to mitigate the devastating impact of the coronavirus alone, investors hoped it would help avert a global depression with the help of other state rescue packages.

The Fed’s action had not cheered Wall Street for long on Monday, with losses of 2%-3% on major indexes, but the mood improved on Tuesday, as other governments and central banks stepped in.

Wall Street S&P 500, Dow Jones and Nasdaq indexes were expected to bounce 4%, the main European bourses were up similar amounts and oil, gold and copper had all swung 3%-5% higher.

“Today there is a strong recovery connected to the move that the Fed has introduced this massive weapon,” said Francois Savary, CIO of wealth manager Prime Partners, adding the Fed needed to prioritize fixing the seize-ups in funding markets.

“The key issue at the end of the day is that we need to deal with a credit markets that is completely closed. First they needed to stop this increase in bond yields… second, they needed to make sure that there is a return of liquidity in the credit then it will be equities – in that sequence.”

Alongside buying unlimited amounts of assets, the Fed will also expand its mandate to corporate and municipal bonds and backstop a series of other measures that analysts estimate will deliver $4 trillion-plus in loans to non-financial firms.

There were also signs of progress in Congress on a $2 trillion U.S. stimulus deal, which Treasury Secretary Steven Mnuchin hoped was “very close”.

Other countries are unveiling their own measures. South Korea’s ravaged market climbed 8.6% after the government doubled a planned economic rescue package to 100 trillion won ($80 billion).

In China, mainland stocks posted their biggest gain in three weeks with a rise of almost 3%, while Japan’s Nikkei soared 7%, its biggest daily rise since February 2016.

But investors were still wary, as global coronavirus infections have topped 350,000 and China posted a rise in new infections brought in from abroad.

Japan said it was postponing the Olympics, General Motors became the latest to abandon its outlook for the year, while Ford had been the latest corporate giant to have its credit rating cut to the brink of ‘junk’ on Monday.

“Markets are continuing to bounce up on the latest policy announcements and then sliding back down as the economic reality of the situation re-emerges,” Deutsche Bank strategist Jim Reid said.

Euro zone business activity data collapsed to a record low on Tuesday and suffered by far its biggest one-month fall since the survey began in 1998.

But government and central bank financial support helped calm nerves in bond markets, where yields on two-year U.S. Treasuries hit their lowest since 2013. Ten-year yields were at 0.8339%, from last week’s peak of 1.28%.

Germany’s 10-year yield was up 2 basis points on the day at -0.36%, compared with a 4 bps rise before the purchasing managers index (PMI) releases, all small moves when compared to record lows hit at -0.90% earlier in March.

“I think we have reached some kind of equilibrium trading range in safe havens,” said DZ Bank strategist Rene Albrecht.

“Given the prospect for the economic downturn and much more (debt) issuance going forward, I think the level where yields are settling down is the place for them to be.”

(Graphic: Global financial markets since coronavirus escalated, here)

ALL ABOUT THE ECONOMY

The impact of the virus on the global economy is evident in a series of growth forecast downgrades and advance readings of PMIs across the world’s biggest economies.

German activity plunged to the lowest since the 2009 crisis, driven by a record services contraction, while French activity hit all-time lows. Japan posted its biggest-ever services fall.

“Economies around the world are going offline and that is devastating for economic activity, it’s creating the most robust dislocation in financial markets in living memory,” said George Boubouras, head of research at K2 Asset Management in Melbourne.

However, the prospect of massive Fed funding pushed the greenback 0.8% lower against rivals, off three-year peaks, falling against the yen and sliding 1% versus the euro.

Commodity and emerging market currencies benefited, with the Australian dollar up as much 2% to $0.59315 and well off 17-year lows.

There was less market volatility too. A gauge of expected euro-dollar swings eased below 12%, from above 14% on Monday, and a measure of U.S. equity volatility slipped to one-week lows around 55 points.

(Graphic: Volatility is back on Wall Street png, here)

(Graphic: China’s coronavirus cases JPG, here)

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