Asian equities enjoyed some much-needed gains Friday after another volatile week on global markets as investors took solace in a blockbuster series of government and central bank measures aimed at cushioning the economic blow from the coronavirus.
The dollar eased somewhat after a lengthy rally fuelled by traders cashing out of their investments, while the embattled oil market extended Thursday’s gains.
With the deadly pandemic showing no sign of ending, countries are going into lockdown, effectively shutting down the global economy and leaving experts in the dark as to how deep and long an expected recession will last.
On Thursday, US Senate Majority Leader Mitch McConnell presented a $1 trillion emergency relief package to combat the turmoil, with $1,200 cash handouts for individuals.
It also includes $208 billion in loans for companies hit by the crisis — $58 billion of it for the troubled airline sector — and $300 billion in small business loans.
The plan is the latest in a series of measures put forward by Washington and comes on top of Federal Reserve interest rate cuts and pledges worth hundreds of billions of dollars to provide liquidity to creaking financial markets.
It also comes in tandem with similar moves by governments and banks around the world, which have provided some support to investors, but which many observers warn could still be too little as the crisis rumbles on.
Hong Kong stocks jumped more than four percent in the afternoon, while Shanghai ended up 1.6 percent, Sydney added 0.7 percent and Seoul jumped more than seven percent.
Taipei gained more than six percent, Manila added 3.4 percent and Bangkok jumped 2.6 percent with Mumbai nearly five percent higher. Wellington jumped one percent, while Singapore rallied 1.9 percent.
Tokyo was closed for a holiday.
“For now… the artillery barrage from the world’s central banks and government treasuries seems to have stopped the rot sweeping the global economy,” said OANDA’s Jeffrey Halley.
The advances followed a positive lead from Wall Street and Europe.
– Sustained pressure –
But, while healthy, the advances come at the end of another tumultuous week for equities and there are warnings of further troubles down the line.
Many analysts expect markets to remain highly volatile and under pressure until health authorities get a better grasp of the scale of the outbreak in the United States and Europe and how long it will curtail activity.
“Despite the positive signs, credit markets continue to be under pressure,” said Gorilla Trades strategist Ken Berman.
“High-yield bonds declined again, as the 10-year Treasury yield fell back to one percent, meaning that the ‘flight-to-quality’ continues. The immediate liquidity issues eased thanks to the central banks’ steps, but credit markets will remain at the centre of attention, due to the systemic risks.”
The dollar was down against most other currencies after soaring over the past week owing to massive demand for the unit from investors running to safety.
The big winners were the South Korean won, Australian dollar, Mexican peso and Russian ruble, which were all up more than two percent, clawing back some of their recent losses.
The pound was up more than one percent, though it was still sitting around 35-year lows after cratering on Thursday.
Oil markets were also a little more cheery, with both main contracts enjoying further buying interest.
Brent gained more than four percent and West Texas Intermediate nearly seven percent, building on Thursday’s jump of 14 percent and 24 percent respectively.
The commodity was helped by a directive from Donald Trump to top up the Strategic Petroleum Reserve to its maximum capacity by buying a total of 77 million barrels from US producers, kicking off with an initial purchase of 30 million barrels.
However, prices are still below $30, while the ongoing price war between Saudi Arabia and Russia is rumbling on as demand remains battered by the virus crisis.
– Key figures around 0730 GMT –
- Hong Kong – Hang Seng: UP 4.2 percent at 22,619.50
- Shanghai – Composite: UP 1.6 percent at 2,745.62 (close)
- Tokyo – Nikkei 225: Closed for a public holiday
- Pound/dollar: UP at $1.1716 from $1.1479 at 2100 GMT
- Dollar/yen: DOWN at 109.92 yen from 110.65 yen
- Euro/dollar: UP at $1.0749 from $1.0692
- Euro/pound: DOWN at 91.80 pence from 93.03
- Brent North Sea crude: UP 4.2 percent at $29.67 per barrel
- West Texas Intermediate: UP 6.9 percent at $26.96 per barrel
- New York – Dow: UP 1.0 percent at 20,087.19 (close)
- London – FTSE 100: UP 1.4 percent at 5,151.61 (close)