HONG KONG, March 19, 2020 (BSS/AFP) – Asian equities took another beating
Thursday while the dollar surged as a European Central Bank plan to spend
more than $800 billion to buy bonds failed to instil optimism in traders that
the world is heading for a virus-fuelled economic catastrophe.
In what one analyst said could be a “game changer” for the coronavirus-
wracked eurozone, the ECB’s so-called Pandemic Emergency Purchase Programme
aims to give financial markets some much-needed liquidity as investors pull
the plug on markets.
It said the 750-billion-euro ($820-billion) programme was temporary and
will be halted when the coronavirus crisis is judged to be over “but in any
case not before the end of the year”.
After announcing the move, ECB boss Christine Lagarde tweeted that
“extraordinary times require extraordinary action. There are no limits to our
commitment to the euro.”
Those comments echoed the words of her predecessor Mario Draghi, whose
pledge to do “whatever it takes” to preserve the eurozone was seen as a
turning point in the region’s sovereign debt crisis.
Asian markets initially climbed on the news but soon went into a tailspin
as investors contemplate months of economic hardship with countries around
the world in lockdown to prevent the spread of COVID-19, which has now
infected more than 200,000 people and killed almost 9,000.
Hong Kong and Singapore each dived more than four percent, Seoul collapsed
eight percent, and Taipei and Mumbai shed more than six percent.
Jakarta dropped five percent, Tokyo, Sydney, Bangkok and Wellington lost
more than two percent, while Shanghai shed 2.1 percent.
Manila plunged almost 25 percent after reopening following a two-day
suspension prompted by the outbreak but it later bounced back to sit 12
percent down.
The sharp losses came in tandem with a rally in the dollar as investors
scrambled for cash to pay debts or just stash away.
The pound is now wallowing around its lowest levels since the mid-1980s,
while the greenback was up more than six percent against the Australian
dollar and more than three percent on the South Korean won. The New Zealand
dollar and Russian ruble lost more than five percent.
– ‘At home watching Netflix’ –
And AxiCorp’s Stephen Innes warned of further turmoil despite the historic
moves by banks and governments. “Wartime economics is not going to help with
everyone in lockdown sitting at home watching Netflix,” he said.
The ECB’s bazooka was the latest in a string of measures by central banks
and governments aimed at supporting the global economy, which have amounted
to almost $2 trillion.
Still, the measures have not been enough to soothe panic-stricken
investors and analysts say more must be done. Soon after the ECB
announcement, French President Emmanuel Macron called for more fiscal action
from leaders.
“It is up to us European states to be ready through budgetary
interventions and greater financial solidarity within the eurozone,” tweeted
Macron.
Australia’s central bank became the latest to move, slashing interest
rates to a record low on Thursday.
The latest rout in Asia followed another day of carnage on Wall Street,
where the Dow ended down more than six percent and below 20,000 for the first
time since 2017 as traders feared that the spiralling pandemic could tip the
world into a severe and long-lasting recession.
The ECB move also had a dramatic effect on the oil market, with the price
of the US benchmark West Texas Intermediate up almost 17 percent at nearly
$24 a barrel, recouping much of the 24 percent lost the day before.
However, the commodity tracked the sell-off on other markets and lost a
large chunk of those gains.
Oil markets have been hammered by collapsing demand as the virus prompts
sweeping travel restrictions and business closures, and as major producers
Saudi Arabia and Russia engage in a price war.
“There is just extreme volatility in the market now as participants try to
assess the economic impact of the coronavirus and what it means for oil
demand,” Daniel Hynes, at Australia & New Zealand Banking Group, said.
“The high level of uncertainty around the hit to demand means that markets
are going to continue to test these levels and invite some sort of reaction
from producers.”
– Key figures around 0410 GMT –
Tokyo – Nikkei 225: DOWN 2.2 percent at 16,367.45
Hong Kong – Hang Seng: DOWN 4.3 percent at 22,344.93 (break)
Shanghai – Composite: DOWN 2.1 percent at 2,670.37 (break)
Dollar/yen: UP at 109.20 yen from 107.96 yen at 2100 GMT
Euro/dollar: DOWN at $1.0892 from $1.0912
Pound/dollar: DOWN at $1.1486 from $1.1589
Euro/pound: UP at 94.75 pence from 94.20 pence
Brent North Sea crude: UP 1.5 percent at $25.26 per barrel
West Texas Intermediate: UP 7.9 percent at $21.98 per barrel
New York – Dow: DOWN 6.3 percent at 19,898.92 (close)
London – FTSE 100: DOWN 4.1 percent at 5,080.58 (close)