By Wayne Cole
SYDNEY (Reuters) – Asian equity markets saw a rocky start on Monday as US equity futures experienced an early breakout amid concerns that the global corona virus shutdown could last for months and do immeasurable damage to economies.
E-mini futures for the S & P 500 slipped 1.7% from the start, while Nikkei futures indicated an opening loss of around 500 points.
Central banks have done everything they can to boost activity through rate cuts and massive asset buying campaigns, which at least reduced the liquidity burden on the markets.
The Canadian central bank surprised on Friday with an emergency rate cut to 0.25% and a quantitative easing program, while New Zealand’s policymakers launched a corporate loan program on Monday to meet liquidity needs.
Rodrigo Catril, a senior FX strategist at NAB, said the main question for the markets was whether all incentives would be enough to help the global economy withstand the shock.
“To answer this question, you have to know how big the containment measures are and how long they will be implemented,” he added.
“This is the great unknown and it suggests that markets are likely to remain volatile until this uncertainty is resolved.”
With this in mind, it was not encouraging that the UK authorities warned of blocking measures that could take months.
Chart: Asian stock markets – https://product.datastream.com/dscharting/gateway.aspx?guid=516bc8cb-b44e-4346-bce3-06590d8e396b&action=REFRESH
While President Donald Trump had spoken about the reopening of the U.S. economy at Easter, on Sunday he extended the guidelines on social restrictions to April 30, saying the peak in respiratory deaths could be two weeks away.
Bond investors seemed to be preparing for a long way, with yields turning negative at the very short end of the curve and those with 10-year debt falling a steep 26 basis points last week to 0.67%.
Treasury futures rose again early Monday, indicating a further decline in yields.
This decline has combined with the Federal Reserve’s efforts to pump more dollars into the markets and has pulled the currency from recent highs.
Indeed, the dollar saw its largest weekly decline in more than a decade last week.
The dollar was 107.80 against the yen, well below the recent high of 111.71. The euro was fixed at $ 1.1118 after rising more than 4% last week.
The fall in the dollar proved to be a plus for gold, which rose 0.4% on Monday to $ 1,625.18 an ounce.
It was unhelpful for the oil as Saudi Arabia and Russia show no signs of retreating into their price war.
Brent crude futures fell 89 cents to $ 24.04 a barrel, while US crude oil fell 96 cents to $ 20.55.
(Reporting by Wayne Cole; editing by Peter Cooney)