Stimulus hopes pull stocks back up
Stocks plunged on Friday with coronavirus panic selling hitting nearly every asset class, before finding some kind of floor as hopes turned to a U.S. stimulus package.
European and U.S. stock futures traded in positive territory and some of Asia’s deepest losses were recovered by the end of a session, in which tight liquidity exaggerated moves. Japan’s Nikkei fell 10% before paring the drop to close 6% lower. Australia’s S&P/ASX200 had its wildest trading day on record, falling past 8% before surging in the last minutes of trade to settle 4.4% higher after the close.
MSCI’s broadest index of AsiaPacific shares outside Japan wobbled 0.1% higher by late-afternoon after being down more than 5% during the morning. It remains set to end the week 11% lower, the biggest drop since 2008.
The turnaround came as central banks from the United States to Australia pumped liquidity into their financial systems and as hopes grew that U.S. Democrats and Republicans could pass a stimulus package on Friday.
It was not clear if the late market moves signalled a recovery in the dire sentiment that has wiped some $14 trillion from world stocks in a month and had Asian markets in freefall at the open.
believe the plunge may have run its course for now.
By late afternoon, Hong Kong’s Hang Seng was down 1.9% and Korea’s Kospi - which had busted through circuitbreakers earlier in the session - had recouped losses to sit 3.4% in the red. Gold and oil had steadied, but the bond market still bore the scars of the morning’s widespread plunge after the Dow Jones posted its worst drop since the 1987 Black Monday crash. In the somewhat calmer currency markets, the dollar held its ground as investors nervous about systemic risks drove demand for the world’s reserve currency.
The plunge, as the coronavirus pandemic spreads, gathered pace after U.S. President Donald Trump spooked investors with a move to restrict travel from Europe, and after the European Central Bank disappointed markets by holding back on rate cuts.