Asian shares hold on to gains but virus keeps markets on edge

TOKYO/NEW YORK (Reuters) – Asian stocks clung to gains on Wednesday, helped by a bounce in Australian shares, but risks for equities remain large as the coronavirus pandemic rattles the underpinnings of the global economy.

E-Mini futures for the S&P 500 traded 1.39% lower in Asian trade, highlighting the cautious mood.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.23%. Australian shares jumped by 2.87%, reversing a 2% decline on Tuesday, as a slowdown in new coronavirus cases and rising iron ore prices lifted the market.

Shares in China, where the coronavirus first emerged late last year, rose 0.18%, supported by hopes the world’s second-largest economy has started to recover.

China’s factory activity improved in March after plunging a month earlier, a private survey showed on Wednesday, just scraping into positive territory and beating analysts’ expectations.

Shares in South Korea, also hit hard by the virus, rose 0.19%, but Japanese shares fell 1.05% as a rapid increase in coronavirus infections in Tokyo fueled speculation the government will place the capital on lockdown.

Wall Street tumbled on Tuesday, with the Dow registering its biggest quarterly fall since 1987 and the S&P 500 its steepest quarterly drop since a decade ago on growing evidence of the massive downturn the pandemic will incur.

U.S. economic activity is likely to be “very bad” and the unemployment rate could rise above 10% because of efforts to slow the spread of the coronavirus, Cleveland Federal Reserve Bank President Loretta Mester told CNBC.

“Investors still want to buy equities, but the coronavirus is making everyone more cautious,” said Kiyoshi Ishigane, chief fund manager at Mitsubishi UFJ Kokusai Asset Management Co in Tokyo.

“There are still a lot of risks out there, but if you can identify individual shares with good dividend yields and strong financials, then you can buy at a pretty good price.”

MSCI’s gauge of stocks across the globe was little changed. The index fell nearly 22% for the quarter.

The number of coronavirus infections globally headed toward 800,000. Deutsche Bank analysts noted, however, that for two consecutive days the global growth in new cases was below 10%, having exceeded that rate for most of the past two weeks.

Health officials were much more cautious. A World Health Organization official warned that even in the Asia-Pacific region, the epidemic was “far from over.”

The dollar bounced in Asia, rising 0.28% to 107.86 yen and gaining 0.36% to $1.2375 per British pound as investors adjusted positions before the release of U.S. manufacturing data.

The dollar fell broadly on Tuesday after the U.S. Federal Reserve said it will allow foreign central banks to exchange their holdings of U.S. Treasury securities for overnight dollar loans to ease a dollar funding crunch.

The yield on the benchmark 10-year U.S. Treasury note eased slightly to 0.6554%.

U.S. crude held steady at $20.49 a barrel, but Brent crude fell 2.09% to $25.80 per barrel as the United States, Russia, and Saudi Arabia jostle over a massive oversupply of oil.

Crude oil benchmarks ended a volatile quarter with their biggest losses in history, with both U.S. and Brent futures hammered throughout March due to the pandemic and the eruption of a Saudi-Russia price war.

Global fuel demand has been cut sharply by travel restrictions due to the coronavirus. Forecasters at major merchants and banks see demand slumping by 20% to 30% in April, and for weak consumption to linger for months.

(Graphic: MSCI All Country Wolrd Index Market Cap link: here)

(Graphic: Global currencies vs. dollar link: here)

Source: Read Full Article

Macy's to drop from S&P 500 to small-cap index

(Reuters) – Macy’s Inc (M.N) will be removed from the benchmark S&P 500 stock index .SPX, the S&P Dow Jones Indices said on Tuesday, as coronavirus-induced store closures compound the retail sector’s struggles with a shift to online shopping.

The company’s shares have plunged more than 70% so far this year, leaving Macy’s with a market value of $1.52 billion as of Tuesday’s close, according to Refinitiv IBES data.

“Macy’s has a market capitalization more representative of the small-cap market space,” S&P said, adding that the company would become part of the S&P small-cap 600 index, effective April 6.

The pandemic has forced U.S. brick-and-mortar retailers, including Macy’s Inc (M.N) and Gap Inc (GPS.N), to shut stores, furlough employees, withdraw forecasts and suspend dividends.

Macy’s will be replaced in the S&P 500 by air conditioning company Carrier Global Corp CARR_w.N.

Carrier was spun out last month by United Technologies in a bid to shed assets to complete its merger with Raytheon Co (RTN.N).

That deal is expected to close on April 3.

Raytheon will be replaced in the S&P 500 by United Technologies’ elevator unit Otis Worldwide Corp OTIS_w.N, according to a statement from the S&P Dow Jones Indices.

Source: Read Full Article

German zoos ask Merkel for funds to feed animals during crisis

BERLIN (Reuters) – Zoos in Germany have written to Chancellor Angela Merkel pleading for 100 million euros to help them look after their animals during the coronavirus crisis.

“Unlike other organizations, we cannot just run down our operations, our animals must be fed and looked after,” said Joerg Junhold, president of the Association of Zoos, which has 56 members in Germany plus a few in Switzerland and Austria.

Zoo costs are as high as ever but with no visitors allowed, there is zero income, said Junhold, meaning some bigger zoos were dealing with weekly losses of about half a million euros.

Berlin Zoo Director Andreas Knieriem said he had been overwhelmed by local support in the German capital but stressed that challenges were enormous.

“I am crossing my fingers that we will all soon have survived this difficult time,” Knieriem said.

On top of the financial problems, keepers at Berlin Zoo have also said some of its animals are missing visitors.

“The monkeys really enjoy watching people,” zoo spokeswoman Philine Hachmeister was quoted by the Maerkische Onlinezeitung as saying, adding seals and parrots were also stimulated by interaction with the visitors.

“It is a bit boring for them at the moment,” she said.

Source: Read Full Article

Congress should wait to see whether more coronavirus action needed: McConnell

WASHINGTON (Reuters) – U.S. Senate Majority Leader Mitch McConnell on Tuesday said U.S. lawmakers should “wait and see” whether a fourth congressional effort was needed to respond to the nation’s coronavirus outbreak and its impact.

McConnell, speaking on syndicated Hugh Hewitt radio program, said policy makers should wait to see how the crisis unfolded before jumping on another bill. He also said the idea of pandemic-related U.S. Treasury bonds was interesting.

Source: Read Full Article

World stocks rally after Chinese data boost to close worst quarter since 2008

LONDON (Reuters) – World stocks looked set to close their worst quarter since 2008 on a brighter note on Tuesday, as strong Chinese factory data held out hope for an economic revival even as much of the rest of the world shut down to fight the coronavirus.

Stocks have rallied since the start of last week but remain down more than 20% for the quarter. European shares have had an even worst time, suffering their worst three months since 1987.

But with trillions wiped off global markets in March and policymakers responding with more than $10 trillion and counting of fiscal and monetary stimulus packages, a semblance of calm has returned this week.

Some analysts have been bold enough to call a bottom in stocks and say the lows of early last week are unlikely to be revisited.

European stocks rallied at the open. The Euro STOXX .STOXXE gained 1.7%, France’s CAC 40 .FCHI 1.15% and the German DAX GDAX 2.08%. Britain’s FTSE 100 .FTSE rose 1.8%.

That followed gains in Asia after China’s official manufacturing purchasing managers’ index (PMI) rose to 52.0 in March from a record-low 35.7 in February, topping forecasts of 45.0.

Analysts cautioned that underlying activity probably remained below par, since the improvement measured the net balance of companies reporting an expansion or contraction, but markets cheered the news.

S&P 500 futures rose 0.6% ESc1, pointing to a stronger open on Wall Street after a rally on Monday lifted the U.S. index towards a 20% gain since the lows of last week.

Despite the more positive mood, not everyone is convinced the current rally has legs.

“In spite of the significant sell-off of most growth-oriented assets since mid-February, we are concerned there is further downside ahead,” said Salman Baig, an investment manager at Unigestion.

“The violent market action should not be understated, but the underlying cause – an accelerating pandemic requiring large parts of the economy to shut down – is still with us.”

The pace of coronavirus infections globally was heading towards 800,000. But Deutsche Bank analysts noted that for two consecutive days the global growth in new cases was 10%, after being well above that for most of the past two weeks.

Health officials are much more cautious. A World Health Organization official warned on Tuesday that even in the Asia-Pacific region the epidemic was “far from over”.

“This is probably the most embarrassing statistic for the West that China could possibly release. Not only did China stop the virus with just 3,309 deaths, they also appear to have done it with just a one-month shutdown of the economy,” Charlie Robertson, the chief economist at Renaissance Capital, said on Twitter.

Some analysts dispute China’s figures, however.

OIL BOUNCES

Elsewhere, oil prices rose off the 18-year lows hit on Monday after the United States and Russia agreed to talks to stabilize energy markets.

Oil prices have been hit by a double whammy, with U.S. crude at one point falling below $20 a barrel on Monday, as the virus outbreak cut demand worldwide and Saudi Arabia got into a price war with Russia.

Brent crude LCOc1 was up 43 cents, or 1.9%, at $23.19 a barrel, after closing on Monday at $22.76, its lowest finish since November 2002. nL4N2BO131

U.S. crude Clc1 was up $1.21, or 6.0%, at $21.30 a barrel, after settling in the earlier session at $20.09, its lowest since February 2002.

The dollar rose for a second day, although the gains were more controlled than the jumps of earlier this month that put severe stress on funding markets for the U.S. currency.

The dollar, measured against a basket of currencies, was up 0.3% at 99.493 =USD.

The euro dropped 0.4% to $1.0995 EUR=EBS. Sterling slipped 0.7% to $1.2330 GBP=D3. The yen was 0.5% lower against the dollar JPY=EBS.

Analysts say investors rebalancing their portfolios at month-end and quarter-end were probably behind some of the dollar’s moves over the next 24 hours.

There was little respite for emerging-market currencies, however. The South African rand ZAR= was near record lows and Latin American currencies were falling once again.  

Bond market moves were more measured than in recent weeks. Italian government bond yields IT10YT=RR were steady before an auction of debt, amid hopes the country’s efforts to contain the spread of the coronavirus may be starting to work.

German benchmark 10-year yields rose 5 basis points to -0.474% DE10YT=RR. U.S. Treasury yields gained 2 to 4 bps, as investors sold safer bonds and bought into equities.  

Source: Read Full Article

China factory activity unexpectedly expands, but economy cannot shake off virus shock

BEIJING (Reuters) – Factory activity in China unexpectedly expanded in March from a collapse the month before, but analysts caution that a durable near-term recovery is far from assured as the global coronavirus crisis knocks foreign demand and threatens a steep economic slump.

China’s official Purchasing Managers’ Index (PMI) rose to 52 in March from a plunge to a record low of 35.7 in February, the National Bureau of Statistics (NBS) said on Tuesday, above the 50-point mark that separates monthly growth from contraction.

Analysts polled by Reuters had expected the March PMI to come in at 45.0.

The NBS attributed the surprise rebound in PMI to its record low base in February and cautioned that the readings do not signal a stabilization in economic activity.

That view was echoed by many analysts, who warn of a further period of struggle for China’s businesses and the broader economy due to the rapid spread of the virus across the world, the unprecedented lockdowns in several countries and the almost near certainty of a global recession.

“This does not mean that output is now back to its pre-virus trend. Instead, it simply suggests that economic activity improved modestly relative to February’s dismal showing, but remains well below pre-virus levels,” said Julian Evans-Pritchard, senior China economist at Capital Economics, in a note to clients.

The pandemic’s sweeping impact on production was underlined in two of Asia’s main export engines, Japan and South Korea. In Japan, industrial out rose at a slower pace in February and factories expect a plunge this month, while production in South Korea contracted the most in 11 years.

Economists are already forecasting a steep contraction in China’s first quarter gross domestic product, with some expecting a year-year slump of 9% or more – the first such contraction in three decades.

Nie Wen, economist at Shanghai-based Hwabao Trust, said given weak export orders, rising stockpile and soft prices, the underlying issue facing Chinese manufacturers has shifted to a lack of market demand, from production shutdowns forced by Chinese authorities.

The survey’s sub-index of manufacturing production picked up to 54.1 in March from February’s 27.8, but new export orders received by Chinese manufacturers were still mired in contraction, after ticking up to 46.4 from 28.7 in February.

Manufacturers are still facing big operational pressures, the survey showed, with over half of the respondents reporting a lack of market demand and 42% reporting financing issues, both up from the previous month.

“The biggest problem facing China’s economy in the second quarter is the slumping foreign demand,” said Nie, adding that authorities may roll out more policies on top of the billions of dollars pumped into the financial system since February to boost domestic consumption and tide over the shrinking overseas demand.

Markets reacted positively to the PMI survey, with Asian stock rising as investors seemed relieved by the rare good news as the pandemic showed few signs of abating.

China’s yuan, however, barely budged, reflecting analysts’ views that a sustainable bounce in manufacturing looked some way off despite a slowdown in China’s coronavirus infections from its peak in February.

GRIM OUTLOOK

Beijing, at great costs to the economy, had imposed draconian quarantine rules and travel restrictions to curb the pandemic that has killed more than 3,000 in the country.

While life for millions of people has started to slowly return to normal, the pace of business resumptions has been constrained by China’s efforts to guard against a second wave of infections from abroad.

The coronavirus, which originated late last year in China, has wreaked havoc along global supply chains and severely hurt foreign demand amid tight lockdowns in Europe, the United States and a number of other key economies where daily life has ground to a halt.

Already, Chinese exporters are seeing overseas orders being scrapped as the worldwide spike in coronavirus infections and deaths has forced many of the nation’s trading partners to slow or suspend production. Globally the outbreak has claimed the lives of over 37,000 people with more than 770,000 infections.

China should not set an economic growth target this year given the heightened uncertainty and avoid having to resort to “flood-like stimulus” to meet the goal, a central bank adviser said.

The service sector, which accounts for 60% of China’s GDP, also saw an expansion in activity, with the official non-manufacturing PMI rising to 52.3 from 29.6 in February, a separate NBS survey showed.

Analysts warn the outbreak could have a lingering impact despite the government loosening restrictions in recent weeks, as many people remain worried about the possibility of new infections or fretting about job security and potential cuts to wages as the economy struggles.

China’s urban jobless rate hit 6.2% in February, up one percentage point from the end of 2019, with analysts estimating about 5 million jobs lost in January-February period.

“The situation remains volatile as the trajectory of the COVID-19 virus outbreak in several key economies is still unpredictable,” ANZ analysts said in a note.

Source: Read Full Article

U.S. airlines must suggest possible compensation for cash grants: Treasury

WASHINGTON/CHICAGO (Reuters) – Airlines must suggest possible compensation in return for government cash assistance and agree to conditions that include not cutting pay or laying off employees through Sept. 30, the U.S. Treasury Department said in guidelines issued on Monday as it prepares to quickly hand out $25 billion.

Congress approved legislation last week authorizing the $25 billion for passenger airlines, as well as $4 billion for cargo carriers and $3 billion in cash for airport contractors like caterers and airplane cleaners.

Under the law, Treasury is supposed to make initial payments of the grants designed to cover payroll costs by next week.

The companies “must identify financial instruments” that would “provide appropriate compensation,” the guidelines said, adding that these could include warrants, options, preferred stock, debt securities or notes.

The department told applicants to apply by April 3 at 5 p.m. to receive funds as soon as possible. Applications received after April 27 may not be considered.

Other conditions for the cash assistance include limits on executive compensation through March 2022 and no stock buybacks or dividend payments through September 2021.

Airlines may also apply for a separate $29 billion in government loans. Separate Treasury guidelines released Monday for loans said carriers must provide financial instruments “for the benefit of taxpayers, in equity appreciation or a reasonable interest rate premium.” Companies critical to U.S. national security can seek loans from a separate $17 billion fund.

Those seeking loans must describe losses they have “incurred or will incur as a result of coronavirus” and detail the cause of the loss such as reduced demand, unavailability of credit or unbudgeted medical expenses.

The Treasury Department said in reviewing applications for the cash assistance it will consider the “adequacy of the proposed financial instruments for providing compensation to the Federal Government.”

It also said it “may refuse to provide payroll support payments to applicants that have taken, or are currently evaluating, any action to commence a bankruptcy.”

Major U.S. airlines on Saturday asked the Treasury department to move quickly to release funds. They have cut tens of thousands of flights as travel demand collapses amid the coronavirus pandemic and warned that without cash they would need to quickly begin massive furloughs.

The chief executives of American Airlines (AAL.O), Delta Air Lines (DAL.N), United Airlines (UAL.O), Southwest Airlines Co (LUV.N) and others wrote in a letter that “given the urgent and immediate need, it is essential that these funds be disbursed as soon as possible.”

Treasury Secretary Steven Mnuchin said Friday taxpayers will be “compensated” for providing emergency assistance to air carriers.

American Airlines said Monday it will be allocated about $12 billion of the combined cash assistance and government loans. It has said it expects that Treasury will not seek “onerous” conditions.

Source: Read Full Article

Russian regions join coronavirus lockdown as toll rises

MOSCOW (Reuters) – More than a dozen Russian regions including the city of St Petersburg introduced a partial lockdown on Monday after Russia recorded its biggest one-day rise in coronavirus cases for the sixth day in a row.

Prime Minister Mikhail Mishustin had told Russia’s more than 80 regions to consider ordering people to stay at home after the official tally of coronavirus cases rose by 302 to 1,836. Nine people have died, authorities say.

Moscow’s authorities have already ordered residents to stay at home, and Mishustin said he thought the measures now needed to be rolled out nationwide.

“I ask the leaders of (Russia’s regions) to pay attention to (Moscow’s) experience and to work out the possibility of introducing such measures in their regions,” he said.

President Vladimir Putin said decisive measures had helped Russia win time in its battle to contain the virus and to prevent an explosive infection rate, but that it was vital authorities used that time effectively.

“This work must be done in reality, I would like to underline this – in reality and not just on paper or for reports. No exceptions whatsoever,” Putin told regional heads in comments broadcast on state television.

At least 14 regions, including Kaliningrad, Tatarstan and the Arctic region of Murmansk, which shares a border with Finland and Norway, heeded the call. Others have implemented different measures.

The southern, mainly Muslim region of Chechnya has imposed an entry ban, while several towns run by state nuclear corporation Rosatom that are closed to foreigners have imposed further entry restrictions.

Murmansk region has restricted entry to the towns of Kirovsk and Apatity where fertiliser producer Phosagro has plants and to other, small industrial settlements. The northern region of Karelia has prohibited the elderly from using public transport.

Moscow Mayor Sergei Sobyanin, a Putin ally, said 20% of residents were ignoring his order to self-isolate, but that he hoped an IT system would be operational by the end of the week that would allow authorities to control the movement of people.

Under the new rules, Muscovites are allowed to go out only to buy food or medicines at their nearest shop, get urgent medical treatment, walk the dog, or take out the bins.

“This may now seem to some of you like some kind of game, a kind of Hollywood thriller. This is no game…,” Dmitry Medvedev, deputy chairman of the Security Council, said in a video address.

“Unfortunately, what is happening now is a real threat to all of us and to all of human civilisation,” said Medvedev, a former president who was prime minister until earlier this year.

Some doctors have voiced scepticism about the accuracy of Russia’s coronavirus figures given what they say has been the patchy nature and quality of testing, allegations that the authorities deny.

Source: Read Full Article

WeWork sells social network Meetup to AlleyCorp, private investors

(Reuters) – Social media platform Meetup said on Monday that shared-office operator WeWork had sold the company to a group of investors led by AlleyCorp, which funds companies in New York.

Meetup, a social network with 49 million members that encourages people to get together in person, was acquired by WeWork in 2017.

Financial terms of the deal were not disclosed, while WeWork declined to comment on the deal value.

The sale comes as SoftBank Group-backed (9984.T) WeWork told investors on Thursday the $4.4 billion in cash and cash commitments it had at the end of 2019 is enough to execute its five-year plan and manage the challenges posed by the coronavirus crisis.

Source: Read Full Article

Cyprus imposes peacetime curfew, extending coronavirus lockdown

NICOSIA (Reuters) – Cyprus imposed a curfew on Monday to contain the spread of coronavirus, extending a broad lockdown introduced two weeks ago after a weekend spike in recorded cases.

From March 31, people with only some exceptions are banned from leaving their homes after 2100 local (1800 GMT) until 0600 the following morning, the health ministry said.

The measures, the most stringent imposed in peacetime, add to restrictions on leaving homes only with a permit. The new curbs would also mean people leaving home on a stated errand could do so only once a day, while fines for those violating the order would double to 300 euros ($330.99), authorities said.

Cyprus took measures early to prevent the spread of COVID-19. Ahead of most European nations it partially sealed its borders on March 14, then extended the shutdown to all air links effective March 21.

But a weekend spike in cases worried authorities, as did long queues forming outside ATMs in some areas on Monday morning by people seeking cash.

Thirty five new cases recorded on Sunday night — more than double the number reported on Saturday — have brought Cyprus’ total to 214 cases. There have been six recorded deaths.

($1 = 0.9064 euros)

Source: Read Full Article