Asia: Markets lifted by huge economic support plans

[HONG KONG] Asian equities enjoyed some much-needed gains on Friday after another volatile week on global markets as investors took solace in a blockbuster series of government and central bank measures aimed at cushioning the economic blow from the coronavirus.

The dollar also eased somewhat after a lengthy rally fuelled by traders cashing out of their investments, while the embattled oil market extended Thursday's gains.

With the deadly pandemic showing no sign of ending, countries are going into lockdown, effectively shutting down the global economy and leaving experts in the dark as to how deep and long an expected recession will last.

On Thursday, US Senate Majority Leader Mitch McConnell presented a US$1 trillion emergency relief package to combat the turmoil, with US$1,200 cash handouts for individuals.

It also includes US$208 billion in loans for companies hit by the crisis - US$58 billion of it for the troubled airline sector - and US$300 billion in small business loans.

The plan is the latest in a series of measures put forward by Washington and comes on top of Federal Reserve interest rate cuts and pledges worth hundreds of billions of dollars to provide liquidity to creaking financial markets.

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It also comes in tandem with similar moves by governments and banks around the world, which have provided some support to investors, but which many observers warn could still be too little as the crisis rumbles on.

Hong Kong stocks ended the morning session 2.8 per cent higher, while Shanghai was up 0.5 per cent, Sydney added 1.9 per cent and Seoul jumped more than four per cent.

Taipei gained almost six per cent, Manila added 2.7 per cent and Bangkok jumped 3.4 per cent with Mumbai and Singapore each more than one per cent higher. Wellington jumped one per cent.

"For now... the artillery barrage from the world's central banks and government treasuries seems to have stopped the rot sweeping the global economy for now," said Oanda's Jeffrey Halley.

The advances followed a positive lead from Wall Street and Europe.

SUSTAINED PRESSURE 

But, while healthy, the advances come at the end of another tumultuous week for equities and there are warnings of further troubles down the line.

Many analysts expect markets to remain highly volatile and under pressure until health authorities get a better grasp of the scale of the outbreak in the United States and Europe and how long it will curtail activity.

"Despite the positive signs, credit markets continue to be under pressure," said Gorilla Trades strategist Ken Berman.

"High-yield bonds declined again, as the 10-year Treasury yield fell back to one percent, meaning that the 'flight-to-quality' continues. The immediate liquidity issues eased thanks to the central banks' steps, but credit markets will remain at the centre of attention, due to the systemic risks."

The dollar was down against most other currencies after soaring over the past week owing to massive demand for the unit from investors running to safety.

The big winners were the South Korean won, Australian dollar, Mexican peso and Russian ruble, which were all up more than two per cent, clawing back some of their recent losses.

The pound was up more than one per cent, though it is still sitting around 35-year lows after cratering on Thursday.

Oil markets were also a little more cheery, with both main contracts enjoying further buying interest.

Brent added more than two per cent and WTI more than four per cent, building on to Thursday's jump of 14 per cent and 24 per cent respectively.

However, they are still below US$30, while the ongoing price war between Saudi Arabia and Russia is rumbling on as demand remains battered by the virus crisis.

AFP