Global Markets Buffeted Again By Virus Concerns

By Frances Yoon and Anna Isaac 

U.S. stock futures and Treasury yields fell on Wednesday, pointing to sustained doubts about the ability of governments and central banks to combat the economic headwinds caused by the coronavirus.

Futures contracts tied to the Dow Jones Industrial Average fell 2%, suggesting U.S. stocks could open lower Wednesday. European stock markets opened higher, with the Stoxx Europe 600 rising 1.3%. The U.K.'s benchmark FTSE 100 was also up 1.2%, shortly after an unexpected rate cut by the Bank of England.

Japan's Nikkei 225 declined 2.3% to close at its lowest level since December 2018. Australia's S&P/ASX 200 dropped 3.6%, hitting its lowest since January 2019, and entering a bear market, typically defined as a decline of at least 20% from a recent peak.

The market moves followed two tumultuous days marked by a violent global selloff and a sharp rebound. U.S. stocks had soared in frenetic trading Tuesday, wiping out much of the losses they suffered just a day earlier in their biggest selloff since the financial crisis. The S&P 500 rose 4.9%.

On Wednesday, the 10-year U.S. Treasury yield stood at 0.719%, down from 0.743% on Tuesday. Bond yields, which move inversely to prices, have swung wildly in recent days, with the widely watched 10-year yield tumbling from above 1% last Thursday to a record intraday trough below 0.4% on Monday.

"It's too early to call this stabilization, and it's too early to position for a rebound here," said Mayank Mishra, a global macro strategist at Standard Chartered Bank in Singapore.

"Financial markets will continue to focus on the economic implications from the virus, and right now the global outlook for growth is not rosy. Those are the forces that markets are reacting to," said Mr. Mishra.

The Bank of England announced an emergency cut to its main interest rate Wednesday morning. The easing of monetary policy came with other measures to support the economy, including cheaper borrowing for small businesses.

The central bank's action follows a cut of the same magnitude by the U.S. Federal Reserve last week. The European Central Bank is due to meet on Thursday. With the ECB's key deposit rate already negative, pressure is mounting on governments to offer fiscal support in response to the virus's impact.

Mr. Mishra said while markets had already priced in likely interest-rate cuts and other support from central banks, government action moved at a slower pace. "The fiscal response is a slower-moving beast, so let's see how that helps stabilize global financial markets," he said.

The Federal Reserve earlier this month cut its key interest rate by 0.5 percentage point to a range of 1% to 1.25%. Many investors expect a further cut at the Fed's scheduled meeting next week, which concludes on March 18.

A push by President Trump to suspend the payroll tax to boost the economy fell flat on Capitol Hill on Tuesday, as lawmakers of both parties said they preferred targeted measures to assist hourly workers and the battered travel industry.

Write to Frances Yoon at [e-mail] and Anna Isaac at [e-mail]

(END) Dow Jones Newswires

March 11, 2020 04:54 ET (08:54 GMT)

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