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Stocks in Asia rise while bond yields reach a new low.
Stocks rose in Asia on Monday as investors made bets that the world’s governments and central banks would step in to help a global economy slammed by the coronavirus outbreak.
But U.S. Treasury prices rose, driving yields lower, in a sign of growing worry in the financial world.
After opening lower, Japanese stocks rebounded, and the Nikkei 225 index was up about 1.4 percent midday. The rise came after the Bank of Japan, the country’s central bank, said that it “will strive to provide ample liquidity and ensure stability in financial markets through appropriate market operations and asset purchases.” It did not announce any specific moves.
Hong Kong shares also rebounded and were trading about 0.9 percent higher. Shares in Shanghai, a market that often gets support from state-linked investment vehicles, was up 2.9 percent.
Futures markets indicated investors expect Wall Street and several European markets to open higher later on Monday.
The bond market continued to reflect pessimism on Monday, as well as confidence that the U.S. Federal Reserve will cut interest rates to support the economy.
Yields on the 10-year U.S. Treasury bond fell to 1.08 percent, edging closer to the psychologically important 1 percent threshold. The drop, driven by rising bond prices, suggests investors are still looking for safe places to park their money, as well as the expected move by the Federal Reserve.
The higher opening for stocks followed one of the worst weeks for global markets since the financial crisis, with several major indexes around the world falling more than 10 percent in just a few days — a stunning decline that came as investors grappled with the potential economic toll the outbreak could take.
The virus, now detected in at least 61 countries, has already shuttered factories and squeezed businesses across the globe, and companies are readjusting their annual profit expectations, economists are lowering their forecasts for global growth and policymakers have signaled that they are ready, if needed, to act to stabilize the economy.
The selling has left markets as precarious as they’ve been since stocks started climbing in March 2009 after the financial crisis. In such cases, investors tend to sell to limit their losses or wait for clarity to emerge, which could take weeks, if not months.
Here’s how the major indexes around the world fared last week:
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S&P 500 in United States: ⬇️ 11%
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FTSE 100 in Britain: ⬇️ 11%
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DAX in Germany: ⬇️ 12%
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KOSPI in South Korea: ⬇️ 8%
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Hang Seng Index in Hong Kong: ⬇️ 4%
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Nikkei 225 in Japan: ⬇️10%
Investors are hoping central banks will step in.
Rumors swirled on Friday that the biggest central banks might make take a coordinated action over the weekend to soothe tumultuous markets, though several economists said chances had dimmed after Federal Reserve Chair Jerome H. Powell released a statement late Friday afternoon pledging to act as needed.
“Some have speculated that globally coordinated easing could come as early as this weekend and we would certainly welcome that,” economists at Evercore ISI wrote in a note Friday. “But we think of the Powell statement as probably a substitute for such early concrete action.”
No such coordinated intervention took place on Monday in Asia. In a statement, the Bank of Japan said it would “closely monitor future developments, and will strive to provide ample liquidity and ensure stability in financial markets through appropriate market operations and asset purchases.” It did not announce any significant actions, however.
Central bank coordination is rare and reserved for moments of major concern. The major central banks cut interest rates simultaneously as markets collapsed in October 2008. A group led by the Fed and European Central Bank lowered borrowing costs by up to half a percentage point outside of their regularly scheduled meeting, the first time the U.S. central bank had joined in on such a move.
The market’s biggest concerns can’t be addressed by central banks.
Still, even if they do make a coordinated move, lowering borrowing costs will get the global economy only so far.
Rates are historically low across advanced economies. They are already negative across Europe and Japan, where infections are rapidly mounting. Officials in those economies had already been trying to coax households and businesses to spend amid lackluster growth by buying huge quantities of bonds.
And it is unclear whether monetary policy is the ammunition needed to fight this particular type of economic threat, at least at the outset. Policymakers cut rates to ward off a downturn — or contain one that has already arrived — by making it cheaper to borrow money, assuming that will help prod the economy.
Rate cuts — or even hints that they are coming — can help calm markets and keep credit flowing.
But a rate cut can do little to restart production lines hobbled by workers placed in quarantine or told to stay home. Nor can central banks do much to lure tourists back to Venice or encourage people to fly again.
“You need to show that the virus is under control,” said Jack Janasiewicz, a portfolio manager with Natixis Investment Managers. “Until that happens, we’re going to be in these volatile swings.”
Amazon says 2 employees infected, as tech companies introduce new restrictions.
Two Amazon employees in Europe have contracted the coronavirus, the company said, and other tech companies have begun taking more drastic measures to prevent their employees around the world from being affected by the outbreak. On Sunday, an Amazon spokesman, Drew Herdener, said that the internet retailer was “supporting the affected employees, who were in Milan and are now in quarantine.”
He added that Amazon, which is based in Seattle, did not know of any employees in the United States who had become sick.
Late last week, Amazon, the second largest private employer in the United States, indefinitely halted all travel, including trips within the U.S.
Other tech firms were also working to secure their offices while minimizing the potential for the spread of the virus.
Over the weekend, Facebook sent out an internal memo that said it would no longer allow social visits from non-employees at any of the company’s global offices.
And on Sunday, Twitter said in a blog post that it would also restrict all nonessential business travel for its employees and partners.
Reporting was contributed by Jeanna Smialek, Matt Phillips, Jack Ewing, Karen Weise, Mike Isaac, Michael Corkery, Alexandra Stevenson and Carlos Tejada.
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March 02, 2020 at 01:30PM
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