More stimulus? Asian shares rise on hopes of more government help

Markets in Asia open higher after stocks in the US rallied following Senate approval of a $2-trillion stimulus bill.

Stock market
US shares rallied the day before the House of Representatives is expected to pass a $2 trillion bill to support the virus-hit economy [File: Brendan McDermid/Reuters]

Asian stocks rose on Friday as investors wagered policymakers would roll out additional stimulus measures to combat the coronavirus pandemic after United States unemployment filings surged to a record.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 1 percent. Australian shares were up 2.02 percent, while Japan’s Nikkei stock index rose 3.65 percent.

E-Mini futures for the S&P 500 rose 0.81 percent in Asia following three consecutive days of gains in the S&P 500 on Wall Street.

The S&P 500 rose 6.2 percent on Thursday while the Dow Jones Industrial Average closed up 6.4 percent, its biggest three-day streak of gains since 1931.

The US dollar nursed losses against significant currencies as central banks’ steps to solve a dollar shortage in funding markets started to gain traction.

The US House of Representatives is expected to pass a $2 trillion stimulus package later on Friday that will flood the world’s largest economy with money to stem the damage caused by the pandemic.

The US Federal Reserve, or the Fed as it is commonly known, has already slashed rates to zero and launched quantitative easing – the purchase of government and corporate bonds in order to inject cash into the financial system and thereby attempting to stimulate economic activity. The Fed will also take the unprecedented step of offering a direct backstop for corporate loans.

The US is now the country with the most coronavirus cases, surpassing even China, where the flu-like illness first emerged late last year. Policymakers may need to offer more stimulus as the virus slams the brakes on economic activity and increases healthcare spending.

“I’m not sure what measures are left, but the reaction in stocks shows some people hoping for more stimulus thought the market was a little oversold,” said Yukio Ishizuki, FX strategist at Daiwa Securities in Tokyo.

“Currencies tell a different story. The dollar is the lead actor. The mad rush to buy dollars due to liquidity concerns is starting to fade.”

The number of Americans filing claims for unemployment benefits surged to a record of more than three million last week as strict measures to contain the coronavirus pandemic ground the country to a sudden halt, data showed on Thursday.

The jobless blowout was announced shortly after Federal Reserve Chairman Jerome Powell said the US “may well be in recession,” an unusual acknowledgement by a Fed chair that the economy may be contracting even before data confirms it.

Global equity markets took the data in their stride, partly because most central banks have already aggressively eased policy and governments are backing this up with big fiscal spending.

Leaders of the Group of 20 important economies pledged on Thursday to inject more than $5 trillion into the global economy to limit job and income losses from the coronavirus and “do whatever it takes to overcome the pandemic.”

In the currency market, the greenback fell 0.25 percent to 109.34 yen in Asia on Friday, on pace for a 1.3 percent weekly decline.

The dollar was also headed for weekly declines against the Swiss franc, the pound, and the euro .

The US currency’s fall after two weeks of gains suggests that the Fed’s efforts to relieve a crunch in the dollar funding market are working, some analysts said.

The yield on benchmark 10-year Treasury notes rose slightly in Asia to 0.8383 percent, while the two-year yield edged up to 0.2946 percent. Bond yields rise as their prices fall.

Yields were still headed for a weekly decline, taking cues from the Fed’s extraordinary steps to bolster markets and the $2-trillion stimulus package.

US crude oil ticked up 1.77 percent to $23 a barrel in Asia. Energy markets have been caught in a tug-of-war between hopes for stimulus spending and worries about excess supplies of crude.

Gold, normally bought as a safe haven, was slightly lower. Spot gold fell 0.30 percent to $1,626.58 per ounce.

Gold market participants remained concerned about a supply squeeze following a sharp divergence between prices in London and in New York. The coronavirus has grounded planes normally used to transport gold and closed precious metals refineries.

Source: Reuters