Stocks Mixed Amid Turmoil; Treasuries Edge Up: Markets Wrap

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U.S. stock futures dropped and the yen advanced in early Wednesday trading in Asia, retracing some of the previous day’s moves as traders continue to test where fundamental valuations lie amid rapidly changing news flow.

Asian stocks opened mixed, with the Sydney market down more than 3.5%, while shares in Tokyo edged higher. The S&P 500 Index gained 6% earlier. Australian and Japanese bond yields climbed after a tumble in Treasuries Tuesday. As the Trump administration moves toward a big fiscal package, Treasury Secretary Steven Mnuchin warned the coronavirus could send U.S. unemployment up to 20% without government intervention. Oil fell to the lowest since2003 before recovering.

“It’s pretty clear that there is potentially more downside to come,” said Henrik Johnsson, global co-head of capital markets at Deutsche Bank AG, told Bloomberg TV. “This has much further to run and we’re only at the beginning of social isolation in Europe and the U.S., and the effects on the real economy are still to be felt.”

The Trump administration moved to send checks to Americans as soon as in two weeks to stave off the financial effects of an unprecedented upheaval in social interactions that looks set to plunge the world into recession. It also asked Congress for hundreds of billions in aid. The Federal Reserve reintroduced additional crisis-era tools to stabilize financial markets.

The policy responses came after stressesappeared in the short-term funding and front-edit credit markets.The three-month dollar Libor rate jumped the most since 2008, and similar maturity cross-currency basis swaps for euro-dollar, a proxy for how expensive it is to get the greenback, traded at the widest since 2011.

Data showed U.S. retail sales fell in February, indicating the main driver of the economy, consumer spending, had begun to slow even before outbreak containment measures began. More companies are scrambling for cash, with Kraft Heinz, Caesars and MGM drawing down credit lines.

These are the main moves in markets:

Stocks

  • Futures on the the S&P 500 fell 2% as of 9:20 a.m. in Tokyo. The index rose 6% on Tuesday.
  • Japan’s Topix index added 2.6%.
  • South Korea’s Kospi gained 0.9%.
  • Australia’s S&P/ASX 200 Index slipped 2.8%.

Currencies

  • The yen was up 0.2% at 107.48 per dollar.
  • The offshore yuan was at 7.0215 per dollar.
  • The Australian dollar was little changed at 60.01 U.S. cents.

Bonds

  • The yield on 10-year Treasuries fell five basis points to 1.03%. It had risen 36 basis points on Tuesday.
  • Australian 10-year yields climbed 12 basis points to 1.16%.
  • Japan’s 10-year yield rose to 0.015%.

Commodities

  • West Texas Intermediate crude rose 0.1% to $26.97 a barrel.
  • Gold was at $1,537.38 an ounce, up 0.6%.

— With assistance by Matthew Miller, Nancy Moran, Sophie Caronello, and Jeremy Herron

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