Markets Mar 17

Stimulus packages give markets hope

Stocks rebound in volatile trade; oil is higher; gold and yen are weak

Stimulus packages give markets hope
 Investors are abandoning gold as a so-called safe-haven metal because of concerns over physical demand as Covid-19 wreaks havoc on the global economy. Photo: iStock

By Umesh Desai

(ATF) Trade of the Day: Stocks rebound in volatile trade; oil is higher; gold and yen are weak.

Quote of the Day: “UCLA Anderson Forecast economists say the US economy has entered a recession, ending the expansion that began in July 2009. “For the full 2020 year, it is expected that GDP will have declined by 0.4%. The revised forecast comes with an important caveat. If the pandemic is much worse than assumed, this forecast will be too optimistic.”

Stock of the Day: CanSino Biologics rose as much as 23% after the vaccine maker said it is jointly developing a vaccine candidate for preventing the disease caused by the novel coronavirus infection.   

Number of the Day: -9% – Goldman Sachs said China’s economy will likely shrink 9% in the first quarter from a previous forecast of 2.5% growth, citing “strikingly weak” economic data in January and February.

Tip of the Day: “Investors are abandoning (gold), the so-called safe-haven metal, for other reasons, including because of concerns over physical demand as Covid-19 wreaks havoc on the global economy. With the safe-haven metal not responding in the way you would expect it to in times like now, I can't help but feel more pain is on the way for gold bugs,” said Fawad Razaqzada, independent market analyst at TradingCandles.com. He forecasts a drop below the recent low of $1,445 is imminent. He said in that case it could head to $1,350. A change in outlook could take place if it broke above $1,505.

Financial markets are set to rebound after Wall Street’s biggest fall since 1987 caused a sell-off across Asia with travel lockdowns, social isolation and distancing impacting economic activity.

The fast-spreading virus which has claimed 7,330 lives and infected over 185,000 people globally remains on top of investors’ minds as the MSCI Asia Pacific ex-Japan index fell 1.44%, weighed down by the Kospi, which dropped 2.5%.

Hong Kong’s Hang Seng index rose 0.87% and the CSI 300 index dropped 0.49%, although the Japanese benchmark Nikkei ended flat and the Australian S&P ASX 200 rose 5.8%.

But a wall of stimulus announced by various governments and central banks are giving investors hope as it has been reported that US Treasury Secretary Steve Mnuchin is pushing for a $850 billion economic stimulus.

This report emerges even as France said it will present an emergency budget on Wednesday that will include 45 billion euros ($50 billion) of spending plus 300 billion euros of loan guarantees, New Zealand unveiled a multi-billion dollar package equal to 4% of its GDP and Turkey made a 100-basis point emergency rate cut.

Still, Goldman Sachs said in a report that US stocks could plunge 20% more after falling into a bear market. Overnight, the Dow Jones Industrial Average sank 12.93%, the S&P 500 plunged 11.98%, and the Nasdaq Composite swooned 12.32%. But following the moves by authorities around the world, Wall Street is making a comeback with the S&P500 up 1% and the Nasdaq up 0.65%. The Dow Jones is flat.

UMESH DESAI

Umesh Desai is Asia Times Finance Editor. Prior to his current role he was at Reuters for 19 years before which he was a credit ratings and equity research analyst. A chartered accountant by training, he is based in Hong Kong. More by Umesh Desai