Europe stimulus fails to calm investors as stocks resume fall

The United States dollar surged and global stock markets fell again on Thursday, with a record plunge in the Philippines, as the European Central Bank’s (ECB) latest promise of stimulus provided only brief solace while the world struggled to contain the coronavirus pandemic.

The Australian dollar was crushed, falling 3.3 percent to a more than 17-year low against the US dollar, and Asian markets gave up initial gains made after the ECB had announced a bond-buying programme.

Oil bounced back in Asian trade, with US crude last up 12 percent to $22.73 per barrel following a 24-percent plunge in New York and Brent up 4 percent to $25.89 after tumbling nearly 13 percent on Wednesday, though analysts said they do not see those gains being sustained.

US stock futures fell 2 percent.

Stocks in The Philippines led Asian markets lower with its main index posting its biggest one-day fall in its history as trading resumed following a two-day shutdown. The Philippine Stock Exchange Index plunged as much as 24 percent.

By mid-morning in Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan had fallen 4 percent to an almost four-year low. Australia’s benchmark erased an early 3 percent rise to trade 2 percent in the red.

Korea’s Kospi fell 6 percent and the won hit a 10-year low even as the central bank was buying dollars to prop up the currency. Markets in Hong Kong and China fell.

“We’re in this phase where investors are just looking to liquidate their positions,” said Prashant Newnaha, senior interest rate strategist at TD Securities in Singapore.

Overnight on Wall Street, the S&P 500 fell 5 percent and is down nearly 30 percent over a month. Household-name blue chips plunged, with General Motors and Boeing, each symbols of US industrial might, losing more than 17 percent in a single day.

The ECB on Wednesday pledged to buy 750 billion euro ($820bn) in bonds through 2020, with Greek debt and non-bank corporate bonds eligible under the programme for the first time.

It follows emergency interest rate cuts around the globe and enormous fiscal support packages. 

But so far none of it has been able to put a floor under dire sentiment, and some $15 trillion in shareholder value has been wiped out in little more than a month of heavy selling.

“Liquidity is not the problem this time around,” said Michael McCarthy, the chief market strategist at brokerage CMC Markets in Sydney.

“This is about the impact on demand and the disruption of global supply chain … (bond-buying) is not speaking directly to the key problem for markets.”

Sell everything

Selling extended across almost all asset classes. Benchmark 10-year sovereign bond yields in Australia, New Zealand, Malaysia, Korea and Singapore and Thailand surged. Bond yields rise as their prices fall.

In currency markets, everything except the dollar and – thanks to the ECB, the euro – collapsed. The British pound fell 1 percent to $1.1495. The New Zealand dollar fell 3 percent to $0.5540 and the Aussie was pounded to $0.5592.

US 10-year Treasuries – bonds issued by the US government and usually seen as a haven in times of turmoil – were steady but have suffered their sharpest two-day sell-off in nearly 20 years.

Gold is down 3 percent for the week.

“I’d say the market is uninvestable at this point,” said Daniel Cuthbertson, managing director at Value Point Asset Management in Sydney. “Until we get a containment of global contractions, the market is just going to be directionless.”

And the virus outbreak has worsened. Italy on Wednesday reported the largest single-day death toll increase from coronavirus since the outbreak began in China in late 2019.

It has killed more than 8,700 people globally, infected more than 212,000 and prompted emergency lockdowns on a scale not seen in living memory.

The US economy could shrink 14 percent next quarter, a JP Morgan economist said on Wednesday, one of the direst calls yet on the potential hit to the US.