(June 16): Asian stocks rebounded from their biggest decline since March and U.S. futures climbed after news about US monetary and fiscal stimulus plans bucked up investor sentiment in face of worries over a second wave of the coronavirus.
S&P 500 futures spiked to session highs on news the Trump administration is considering US$1 trillion (S$1.39 trillion) in infrastructure spending. The index Monday erased losses and closed higher after the Federal Reserve detailed plans to buy individual corporate bonds, underscoring its role as a backstop. The MSCI Asia Pacific Index climbed over 3%, while the dollar slumped and Treasuries dropped.
Japanese shares got added support from the Bank of Japan upsizing a corporate-lending support programme while keeping its main policy settings unchanged on Tuesday. Crude oil prices slipped after rising Monday.
The rebound in risk appetite after a slide in equities and rise in the dollar last week and into much of Monday’s session showcased the importance of policy support as investors debate prospects for economic recovery. Rising numbers of coronavirus cases in a range of locations around the world raised doubts about a continuation of the dramatic recovery in stocks since March.
“The size and the pace of Fed balance sheet expansion is something that will put a floor under global equity markets,” Stephen Gallo, BMO Capital Markets head of European FX strategy, said on Bloomberg TV.
The Fed will start buying corporate bonds Tuesday. Meantime, the Trump administration is preparing a nearly US$1 trillion infrastructure proposal as part of its push to spur the world’s largest economy back to life, according to people familiar with the plan.
Elsewhere, oil was back around US$37 a barrel amid signs of improving demand and declining production.
These are some key events coming up:
- Policy decisions from the Bank of England and the Swiss National Bank are due this week.
- Cboe plans to open its trading floor, which has been electronic only since March 16.
- Federal Reserve Chairman Jerome Powell delivers his semi-annual policy report to Congress.
These are some of the main moves in financial markets:
Stocks
- S&P 500 futures rose 1.5% as of 1:26 p.m. in Tokyo. The S&P 500 Index rose 0.8% in New York.
- Japan’s Topix Index jumped 3.5%.
- Kospi Index rose 4.5%.
- Australia’s S&P/ASX 200 Index rose 4%.
- Hong Kong’s Hang Seng Index gained 3%.
- Shanghai Composite Index gained 0.9%.
Currencies
- The Japanese yen dipped 0.2% to 107.50 per dollar.
- The offshore yuan was at 7.0645 per dollar, up 0.1%.
- The euro traded up 0.1% to $1.1336.
- The Bloomberg Dollar Spot Index fell 0.4%.
Bonds
- The yield on 10-year Treasuries climbed about three basis points to 0.75%.
- Australia’s 10-year bond yield rose about five basis points to 0.91%.
Commodities
- West Texas Intermediate crude dipped 0.5% to US$36.95 a barrel after climbing 2.4% Monday.
- Gold rose 0.2% to US$1,728 an ounce.
