The Fed's package helped calm nerves in bond markets where yields on two-year Treasuries hit their lowest since 2013, while 10-year yields dropped back sharply to 0.77%.
The Fed's package helped calm nerves in bond markets where yields on two-year Treasuries hit their lowest since 2013, while 10-year yields dropped back sharply to 0.77%.

Markets likely to stay volatile, Asian peers rally on Fed's stimulus package

  • MSCI's broadest index of Asia-Pacific shares outside Japan added 1.2%, though that followed a drop of almost 6% on Monday
  • In its latest step, Fed offered to buy unlimited amounts of assets to steady markets and expanded its mandate to corporate and muni bonds

Indian stock markets are likely to be volatile on Tuesday tracking rise in Asian peers after the US Federal Reserve's stimulus package to stabilise the financial system eased debt market pressures, even if it could not offset the immediate economic hit of the coronavirus (COVID-19).

While Wall Street seemed unimpressed, investors in Asia were encouraged enough to lift Japan's Nikkei by 4.9%.

MSCI's broadest index of Asia-Pacific shares outside Japan added 1.2%, though that followed a drop of almost 6% on Monday. South Korea and Australia also recouped a little of their recent losses.

In its latest drastic step, the Fed offered to buy unlimited amounts of assets to steady markets and expanded its mandate to corporate and muni bonds.

The numbers were certainly large, with analysts estimating the package could make $4 trillion or more in loans to non-financial firms.

The Fed's package helped calm nerves in bond markets where yields on two-year Treasuries hit their lowest since 2013, while 10-year yields dropped back sharply to 0.77%.

Speculation is mounting data due on Thursday will show US jobless claims rose an eye-watering 1 million last week, with forecasts ranging as high as 4 million.

Goldman Sachs warned the U.S. economic growth could contract by 24% in the second quarter, two-and-a-half times as large as the previous post war record.

While governments around the globe are launching ever-larger fiscal stimulus packages, the latest US effort remains stalled in the Senate as Democrats said it contained too little money for hospitals and not enough limits on funds for big business.

Back home, the clamour for a rate cut has become louder with HDFC Bank Ltd managing director Aditya Puri seeking an unscheduled cut by the Reserve Bank of India ahead of the monetary policy announcement on 3 April. In a conference call with reporters on Monday, Puri said that RBI should look to tide over the current crisis by taking steps, such as forbearance on asset classification across sectors, to help businesses impacted by the coronavirus pandemic.

Even as demand for fast-moving consumer goods has continued to surge in India, makers and distributors of essential goods have said that strict lockdowns in several states over the past two days has caused a disruption in the supply and movement of goods.

The government on Monday allowed companies to spend their corporate social responsibility (CSR) funds to fight the COVID-19 pandemic, a notified disaster.

Meanwhile, the logjam combined with the stimulus splash from the Fed to take a little of the shine off the US dollar, though it remains in demand as a global store of liquidity.

The dollar eased just a touch on the yen to 110.90 after hitting a one-month top at 111.59 on Monday, while the euro inched up to $1.0754 from a three-year trough of $1.0635.

The dollar index stood at 102.120, off a three-year peak of 102.99.

Gold surged in the wake of the Fed's promise of yet more cheap money, and was last at $1,564.51 per ounce having rallied from a low of $1,484.65 on Monday.

Oil prices also bounced after recent savage losses, with US crude up 64 cents at $24.00 barrel. Brent crude firmed 53 cents to $27.56.

(Reuters contributed to the story)

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