Global Stocks Slide Ahead of U.S. Jobless Claims Data

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03/26/2020 | 12:41 pm

By Anna Hirtenstein and Chong Koh Ping

Stocks slipped Thursday as investors await fresh data on U.S. unemployment claims for cues on the economic disruption caused by the coronavirus pandemic, which has forced a shutdown of wide swaths of the country.

Futures tied to the S&P 500 edged down 1%, signaling an end to two days of gains in U.S. stocks. The pan-continental Stoxx Europe 600 declined 1.3%.

The outbreak continues to spread in the U.S., where more than 60,000 people have been infected, leaving lawmakers struggling with the economic consequences of the pandemic. The country now trails only China and Italy in the number of confirmed coronavirus cases, even as emergency measures to contain the outbreak has stalled business activity.

A $2 trillion emergency relief package approved by the U.S. Senate on Wednesday is expected to help stabilize the economy, but may not enough to bring it back to health. The U.S. Labor Department's jobs-claims report is likely to show that new applications for unemployment benefits has jumped to the highest level on record for the week ending March 21, economists said.

"The reality is that there's still a lot of uncertainty to the degree to which the virus disrupts economic activity. Markets are digesting that, " said Anthony Rayner, a multiasset fund manager at Premier Miton. "There's almost a point where the more policy makers do, whether it's monetary or fiscal, the more people panic in a way."

In Europe, government bonds from debt-laden nations in the southern part of the region continued to rally Thursday. The European Central Bank late Wednesday "broke new ground" by giving itself significantly more flexibility on its additional EUR750 billion ($821 billion) bond-purchase program, according to Florian Hense, an economist at Berenberg Bank.

Policy makers waived the limits on the share of a member state's outstanding bonds that it can buy under this particular ECB mandate, and allowed the purchase of debt with shorter maturities as well as Greek sovereign debt, Mr. Hense wrote in a note. The yield on Greece's 10-year bonds, which had been roiled in recent weeks as investors shunned assets considered to be risky, fell to 2.004%, from 2.477% on Wednesday. Italy, Spain and Portugal also saw bond prices climb, leading to lower yields.

European government leaders are poised to debate more options on Thursday for countering the economic impact of the coronavirus, including the possibility of issuing common debt. The region's response has so far been uneven, with rich northern countries including Germany unveiling massive fiscal support packages, while those in the highly indebted south employ more modest measures.

In commodity markets, crude-oil prices fell, pushed lower by evidence that the pandemic is leading to an unprecedented decline in energy demand. Global oil consumption will fall by 10.5 million barrels a day in March, and by 18.7 million barrels a day in April, compared with a year earlier, analysts at Goldman Sachs Group said. Refineries will run out of space to store refined products within weeks, the bank added, at which point refineries will cut the amount of crude oil they buy. Brent-crude futures declined 1.5%.

Most major stock markets in the Asia-Pacific region closed lower. Japan's Nikkei 225 lost 4.5%. Singapore's FTSE Straits Times Index shed 1% after the country forecast that the economy could contract by up to 4% in 2020 in its first full-year recession since 2001.

Volatile stock markets reflect investors grappling with a lot of conflicting information, said Vikas Pershad, portfolio manager at M&G Investments.

"The markets are not broken," Mr. Pershad said. "What we're seeing is a very large disconnect between the present world and the future that they're pricing in."

The bill for the stimulus package approved by the Senate will now move to the House as Congress seeks to give American families and businesses a financial shield against the ravages of the pandemic.

"We know that governments across the board, including the U.S. now, have finally come around to supporting the real economy, individuals, corporations, with fairly large packages," said Peter Schaffrik, a global macro strategist at RBC Capital Markets. "The trouble is that we have no idea how long the entire virus lockdown situation might last."

The yield on the benchmark 10-year U.S. Treasury meanwhile retreated to 0.805%, from 0.854% Wednesday.

The dollar edged down, with the ICE Dollar Index declining almost 1%, signaling that the Federal Reserve's moves to improve liquidity in currency markets is helping meet the demand and ease strains. The currency has retreated close to 2% this week as supply pressures have eased.

"The Fed has done a good job of getting us back from a bad place," said Kit Juckes, a currencies strategist at Société Générale. "Powell has reliquified currency markets, the plumbing job is going as well as could be expected."

Write to Anna Hirtenstein at anna.hirtenstein@wsj.com and Chong Koh Ping at chong.kohping@wsj.com

 

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