U.S. Futures Gain After Worst Stock Rout Since ‘87: Markets Wrap

(Bloomberg) —

U.S. futures advanced and the yen slid in volatile trading after the biggest plunge in Wall Street stocks since 1987. Asia-Pacific shares ranged from a further drop in South Korea to gains in Australia.

Japan’s share benchmark swung from a loss of 3% to a gain of more than 3%. Australia jumped. Hong Kong and China fluctuated. S&P 500 and Nasdaq futures reached their limit-up. The S&P 500 Index sank 12% Monday, erasing its gain for 2019, after President Donald Trump warned of a possible recession, with economic disruption from the coronavirus potentially extending into summer. Treasury yields rose after plummeting Monday. Australian bond yields climbed as traders continue to rush for cash. Crude oil traded near $30 a barrel after plunging almost 10% in New York.

“A bear market does not preclude rallies,” said Eleanor Creagh, market strategist at Saxo Capital Markets. “In fact, the biggest rallies can be in bear markets — erratic swings are exacerbated by the present high-volatility regime and strained liquidity conditions. With VIX remaining significantly above the long-term equilibrium, alarm bells are still sounding and traders should be wary of relief rallies.”

The Federal Reserve and other central banks have dramatically stepped up efforts to stabilize capital markets and liquidity, yet the moves have so far failed to boost sentiment or improve the rapidly deteriorating economic outlook. An International Monetary Fund pledge to mobilize its $1 trillion in lending capacity also had little impact in markets.

Investors continue to clamor for massive spending packages by governments around the world to offset the pain from closures of schools, restaurants, cinemas and sporting events. New Zealand announced a NZ$12.1 billion ($7.3 billion) spending package to counter the economic impact of the virus. Australia’s government is preparing to scale up fiscal stimulus just days after announcing a A$17.6 billion ($10.7 billion).

In the latest attempts to stem the spread of the virus, Hong Kong was set to issue its second-highest travel alert for residents and extend quarantine measures for people coming from abroad. The Philippines became the first country to shut its financial markets. Earlier, Trump said Americans should avoid gathering in groups of more than 10 people and stop eating out at restaurants and bars. Canada shut its border to most foreigners as cases worldwide top 174,000 worldwide and deaths exceed 7,000.

These are the main moves in markets:

Stocks

Topix Index was up 2.6% as of 1:45 p.m. in Tokyo.S&P 500 futures were up 3.6% after the index plummeted 12% Monday.Kospi index fell 1.9%.Australia’s S&P/ASX 200 rose 5.1%.Hong Kong’s Hang Seng Index rose 1.1%.Shanghai Composite Index was flat.MSCI Asia Pacific Index rose 0.7%.

Currencies

The yen fell 0.7% to 106.56 per dollar after strengthening 1.7%.The offshore yuan rose 0.2% to 7.0018 per dollar.The euro was flat at $1.1182.

Bonds

The yield on 10-year Treasuries rose five basis points to 0.76% after declining 24 basis points Monday.Australia’s 10-year bond yield rose 12 basis points to 1.03%.

Commodities

West Texas Intermediate crude rose 4.3% to $29.91 a barrel after sliding 9.6%.Gold slipped 0.7% to $1,503 an ounce.

–With assistance from Jeremy Herron and Vildana Hajric.

To contact the reporter on this story: Andreea Papuc in Sydney at [email protected]

To contact the editors responsible for this story: Christopher Anstey at [email protected], Ravil Shirodkar

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