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Dollar extends gains; bonds surge after stimulus: markets wrap

The yen, so often a haven amid market stress, slumped in a sign of the extraordinary demand for the greenback. Asian stocks mostly dropped.
Image: Kiyoshi Ota/Bloomberg

The dollar extended gains as investors sought havens while they questioned the effectiveness of a rapidly strengthening battery of economic and financial-support measures by global policy makers. Stocks were mixed worldwide in volatile trading.

Sovereign bonds from Italy to Germany and France soared after the European Central Bank announced a huge boost in its efforts to stabilise the economy and capital markets. US stock futures fluctuated as investors weighed the growing likelihood of a global recession. The Stoxx Europe 600 Index rose.

The yen, so often a haven amid market stress, slumped in a sign of the extraordinary demand for the greenback. Asian stocks mostly dropped. Treasuries climbed. The dollar strengthened for an eighth day versus a basket of its major peers, approaching its highest in at least 15 years.

Policy makers around the world have increasingly rushed in recent weeks to stem what looks to be a calamitous shock coming to their economies, but investors have been underwhelmed with most of the moves, while the ensuing health crisis shows little sign of abating. The rush into cash has battered risk assets almost everywhere, particularly stocks and high-yield bonds.

The ECB unveiled a temporary program of asset purchases worth 750 billion euros ($820 billion) to fight the impact of the pandemic, following the launch of a program to support money-market mutual funds by the Fed. Still, US shares suffered another plunge on Wednesday as investor focus turned to assessing the length of the economic downturn.

“It’s a good start and a step in the right direction with the tools that they have available, but they can still do more,” Sue Trinh, global macro strategist at Manulife Asset Management in Hong Kong, told Bloomberg TV. “There’s much more need for U.S. dollar liquidity to get to where it’s needed the most,” she said. “At the moment the markets are screaming it’s not enough — we need to see more of that.”

The ECB package allows the central bank to buy private and public sector securities and broadens the eligibility to cover more assets. Meanwhile, the US Senate cleared the second major bill responding to the coronavirus pandemic and White House economic adviser Larry Kudlow said the government might take equity positions as part of corporate rescues.

Elsewhere, oil rose to take back some of Wednesday’s 24% plunge that left prices at an 18-year low.

Here are the main moves in markets:

Stocks

  • Futures on the S&P 500 Index climbed 0.1% as of 8:41 a.m. London time.
  • The Stoxx Europe 600 Index increased 1.2%.
  • The MSCI Asia Pacific Index declined 2.5%.
  • The MSCI Emerging Market Index fell 2.6%.

Currencies

  • The Bloomberg Dollar Spot Index gained 0.6%.
  • The euro decreased 0.3% to $1.0877.
  • The British pound dipped 0.4% to $1.156.
  • The onshore yuan weakened 0.7% to 7.098 per dollar.
  • The Japanese yen weakened 0.9% to 109.01 per dollar.

Bonds

  • The yield on 10-year Treasuries fell three basis points to 1.16%.
  • The yield on two-year Treasuries dipped three basis points to 0.50%.
  • Germany’s 10-year yield sank eight basis points to -0.32%.
  • Britain’s 10-year yield declined three basis points to 0.766%.
  • Japan’s 10-year yield climbed less than one basis point to 0.083%.

Commodities

  • West Texas Intermediate crude rose 14.5% to $23.32 a barrel.
  • Brent crude climbed 8.1% to $26.89 a barrel.
  • Gold weakened 0.1% to $1,483.90 an ounce.

© 2020 Bloomberg

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