(Bloomberg) — Another painful session for global markets began Monday with a slump in equities and a slide in sovereign bond yields, as investors reacted to a much deeper decline in China’s manufacturing than expected, and the continued spread of the coronavirus.
Japanese stocks opened 1.3% lower, and S&P 500 futures slumped over 1%, with a signal from the Federal Reserve Friday that it’s open to easing policy providing little comfort. Australian and New Zealand 10-year yields set new record lows and Treasury yields slid to 1.11%. Moves did ease somewhat in currencies in early trading and oil erased its losses, while South Korean shares edged higher at the open.
The number of U.S. cases climbed over the weekend, while those in Italy and South Korea jumped. Deaths came in the U.S., Thailand and Australia. Japan woke up Monday to school closures and an increasing number of employers asking workers to stay at home.
Goldman Sachs Group Inc. economists now expect the virus to inflict a “short-lived global contraction” on the world economy that forces the Fed to slash rates in the first half. Fed Chairman Jerome Powell has opened the door to a rate cut, citing the “evolving risks” posed to the U.S. economy from the virus, in a rare statement issued Friday.
“Markets face significant uncertainty in the short term and remain at high risk of more downside given the unknowns around Covid-19,” said Shane Oliver, a global investment strategist at AMP Capital Investors Ltd. in Sydney. Concern remains that “it will disrupt economic activity more deeply and for longer than had been expected a week or so ago.”
Elsewhere, the Mexican peso tumbled about 1% after U.S. President Donald Trump said he is considering increased controls on the border since Mexico reported its first coronavirus case.
Here are some key events coming up:
A key factory gauge on Monday is projected to show that U.S. manufacturing came close to stagnating last month. The ISM’s purchasing managers index is estimated to fall to 50.5 from 50.9.The Reserve Bank of Australia sets policy on Tuesday.U.S. citizens in states including California and Texas will vote on “Super Tuesday” for a Democratic candidate to run against President Donald Trump in November’s election.The Bank of Canada has a rate decision on Wednesday.OPEC ministers gather in Vienna on March 5-6.
These are the main moves in markets:
Stocks
Japan’s Topix index fell 1.2% as of 9:01 a.m. in Tokyo.South Korea’s Kospi index rose 0.6%.Futures on the S&P 500 dropped 1.1%. The underlying gauge fell 0.8% on Friday.Australia’s S&P/ASX 200 Index slid 2.7%.
Currencies
The yen rose 0.2% to 107.67 per dollar.The kiwi retreated 0.3% to 62.30 U.S. cents.The offshore yuan declined 0.1% to 6.9847 per dollar.The euro added 0.2% to $1.1052.
Bonds
The yield on 10-year Treasuries lost four basis points to 1.11%.New Zealand’s 10-year yield declined about 14 basis points to 0.92%.Australia’s 10-year yield fell 13 basis points to 0.69%.
Commodities
West Texas Intermediate crude was at $44.74 a barrel.Gold fell 0.2% to $1,582 an ounce.
–With assistance from Lin Zhu.
To contact the reporter on this story: Adam Haigh in Sydney at ahaigh1@bloomberg.net
To contact the editors responsible for this story: Christopher Anstey at canstey@bloomberg.net, Andreea Papuc
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