Virus whammy: Asian stocks plunge as Philippines shuts markets

Asian shares fell on Tuesday in a topsy-turvy session following one of Wall Street’s biggest one-day routs in history as headlines about the coronavirus outbreak and its global economic effect whiplashed investor sentiment.

The Philippines became the first country to shut its financial markets and stopped trading until further notice, according to the Philippine Stock Exchange and the Bankers Association of the Philippines, after financial markets cratered on Monday.

The S&P 500 had fallen 12 percent in the last trading session, its biggest drop since “Black Monday” 30 years ago, as a series of emergency central bank rate cuts globally only added to the recent sense of investor panic.

While some markets such as United States stock futures bounced in Asian trade after the significant plunge, there were no convincing reasons for a sustained rally.

MSCI’s broadest index of Asia-Pacific shares outside Japan gave up early gains to trade 0.5 percent lower. Japan’s Nikkei stock index fell 0.06 percent and South Korea’s KOSPI was off 2.16 percent. Australian shares were up 2.73 percent although this followed a plunge of almost 10 percent on Monday.

“The move in US stock futures prompted some buying of battered down sharers and lifted dollar/yen,” said Junichi Ishikawa, senior FX strategist at IG Securities in Tokyo.

“The focus is shifting to the fiscal response to the virus. We’re locked in a pattern where markets bounce and then resume falling.”

In the Philippines, the stock exchange was closed indefinitely while currency and bond trading was suspended.

The Philippine Stock Exchange said trade was suspended until further notice “to ensure the safety of employees and traders,” amid a broader national lockdown.

National Treasurer Rosalia de Leon cited the lockdown as the reason for the suspension of fixed income trade. Currency trading is to resume on March 18.

The virus has infected at least 140 people in the Philippines and killed a dozen. The pandemic comes as Philippine equities have tumbled more than 30 percent this year as stocks around the world plunged on fears of a global recession.

President Rodrigo Duterte previously widened a month-long lockdown of the Manila region to cover the country’s main Luzon island, home to at least 57 million people.

More declines

Some $2.69 trillion in market value was wiped from the S&P 500 on Monday as it suffered its third-largest daily percentage decline on record. Over the past 18 days, the benchmark index has lost $8.28 trillion.

US stock futures rose by their daily limit in Asian trading, also driven in part by hopes for big US fiscal spending. This lifted some Asian bourses into positive territory, but the gains did not last.

Gold, which is normally bought as a safe-haven, extended declines on Tuesday as some investors chose to sell whatever they could to keep their money in cash.

Oil futures rebounded in Asia, but downside risks remain due to an expected slump in global energy demand and Saudi Arabia’s plans to increase crude output to expand its market share.

The US Federal Reserve stunned investors with another emergency rate cut on Sunday, prompting other central banks to ease policy in the biggest coordinated response since the global financial crisis more than 10 years ago.

Investors, however, are worried that central banks may have spent all their ammunition and that more draconian restrictions on personal movement are necessary to contain the global coronavirus outbreak.

The Group of Seven finance ministers are likely to hold a call on Tuesday night, which has fuelled speculation that a coordinated fiscal response could be in the works.

Traders are looking ahead to data due later on Tuesday, which is forecast to show German investor sentiment tumbled in March.

The US will also release retail sales and industrial production for February, which is unlikely to reflect the effects of the coronavirus.

Some investors say markets will not settle unless the US government announces a big fiscal spending package to match the Fed’s bold actions to slash rates and keep credit markets functioning.

Others say liquidity in some financial markets is starting to fall because there is such a high degree of uncertainty, meaning even some traditional safe-havens may not be that safe.

Spot gold fell 1.12 percent to $1,497.60 per ounce.

In the currency market, the Swiss franc, another safe haven, weakened by 0.3 percent to 0.9369 per US dollar as traders pondered policymakers next moves.

The US dollar rose 0.7 percent to at 106.67 yen, recovering slightly from a 2 percent decline from the previous session as the Fed’s rate rippled through financial markets.

US crude ticked up 3.87 percent to $29.81 a barrel. Brent crude also rose 2.53 percent to $30.81 per barrel, but these gains are likely to be temporary.

Saudi Aramco reiterated on Monday plans to boost output to record levels. Top global oil producers Saudi Arabia and Russia started a price war after failing to agree on a plan to curb supply.

The coming flood of supply from Saudi Arabia and other producers could result in the largest surplus of crude in history, said global information provider IHS Markit.