Asian stocks mixed on warnings of global slowdown

Asian share markets took a breather on Wednesday as warnings of the worst global recession since the 1930s underlined the economic damage already done even as some countries tried to reopen for business.

The International Monetary Fund warned on Tuesday that the world faces its worst recession since the Great Depression almost a century ago, with a potential $9 trillion loss in output over two years in its best-case scenario.

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China moved again to cushion its economy, cutting a key medium-term interest rate to record lows and paving the way for a similar reduction in benchmark loan rates in the run-up to its first-quarter gross domestic product announcement on Friday.

While not unexpected, it did help MSCI’s broadest index of Asia-Pacific shares outside Japan edge up 0.3 percent to a fresh one-month top.

Shanghai blue chips, however, eased 0.28 percent and the broader Shanghai Composite Index lost 0.2 percent.

Hong Kong’s Hang Seng Index slipped 0.1 percent while South Korea’s Kospi gained 1.72 percent.

Japan’s Nikkei erased early losses to gain 0.2 percent, following a 3 percent jump the previous session. US E-Mini futures for the S&P 500 dipped 0.6 percent, following a 3 percent rise in New York.

“Flattening infection curves and the thoughts of more stimulus have lifted all boats,” said Stephen Innes, chief global market strategist at AxiCorp.

“However, appearances can be deceiving as behind the headlines lie the most gnarly storm clouds building, suggesting there is still much to be worried about.”

Even as some states in the United States considered relaxing restrictions, the country’s death toll rose by at least 2,228, a single-day record, according to a Reuters tally.

US President Donald Trump responded by saying some states could still open shortly or even immediately. He also temporarily halted funding to the World Health Organization, saying it should have done more to head off the pandemic.

Bruce Kasman, chief economist at JPMorgan, warned that the global economic slowdown would take a heavy toll on corporate earnings.

“We project global profits to experience a roughly 70 percent peak-to-trough decline in 2020,” he wrote in a note.

“Even with a projected strong subsequent rebound, global profits are expected to stand 20 percent below their forecasted pre-pandemic level at the end of next year.”

Shares of JPMorgan Chase and Wells Fargo & Co both fell on Tuesday as the banks set aside billions of dollars to cover potential loan losses from the pandemic.

Oil steadies, gold shines

In energy markets, oil prices steadied on hopes for purchases by consumer countries for their strategic stockpiles on a scale not before seen.

US crude was last up 33 cents at $20.44, having shed 10 percent on Tuesday due to concerns over virus-hit demand levels, while Brent crude edged up 23 cents to $29.83 in erratic trade.

Gold was up near its highest in more than seven years as investors flocked to the safe haven amid concerns over the economic slowdown. 

Meanwhile, bond markets continued to wager on tough times ahead, along with unlimited support from central banks and a disinflationary pulse from lower energy prices.

Yields on US 10-year Treasuries have settled about 0.74 percent, more than 100 basis points below where they started the year.

That drop in yields combined with the vast amounts of cash being created by the Federal Reserve has been a drag on the US dollar in recent sessions.

Currencies leveraged to global growth, including the Australian and New Zealand dollars, have led the way higher though the dollar has also lost ground to its major peers.