BANGKOK (AP) – Asian shares are steady in a quiet trading yesterday after Wall Street closed out its best week in 45 years thanks to the Federal Reserve’s titanic effort to support the economy through the coronavirus crisis.
Many regional markets were closed for weekend holidays. Japan’s Nikkei 225 index advanced, gaining 0.8 per cent to 19,326.78.
In South Korea, the Kospi jumped 1.3 per cent to 1,859.60. Shares also rose in Taiwan and Malaysia. But the Shanghai Composite index lost one per cent, to 2,798.07.
Overnight, the United States (US) central bank announced programs to provide up to USD2.3 trillion in loans to households, local governments and businesses as the coronavirus outbreak tips the country into what economists say may be the worst recession in decades.
The Fed’s actions completely overshadowed a government report that another 6.6 million people applied for unemployment benefits last week.
Stock investors expected such dismal numbers, and some are looking ahead to a possible reopening of the economy.
“It looks like the Feds are on a mission to blow holes in every dam that stops the flow of credit. And it sure sounds like they have plenty more dynamite if needed,” Stephen Innes of AxiCorp said in a commentary.
The stock market is not the economy, and that distinction has become even more clear this week. For the week, the S&P 500 jumped 12.1 per cent, its best performance since late 1974. US markets will be closed for holidays.
Stock investors are continuously looking ahead to where the economy will be a few months or more in the future, which largely depends on the state of the coronavirus pandemic and on mass shutdowns meant to contain it.
“The market is solely focused on the number of cases,” said Quincy Krosby, Chief Market Strategist at Prudential Financial. “The question is when can the restrictions be lifted? That’s what the market is focused on, when does America open up for business again?”
The S&P 500 rose 39.84 points to 2,789.82. The Dow Jones Industrial Average added 1.2 per cent, to 23,719.37, and the Nasdaq climbed 0.8 per cent to 8,153.58.
While hopes are building that a plateau may be arriving for infections in several hotspots, it’s not assured. In the meantime, the head of the International Monetary Fund (IMF) said on Thursday the global economy is set for its deepest recession since the Great Depression..
One in 10 US workers has lost their jobs in the last three weeks.
“You typically have very strong rebounds, even in a bear market,” Krosby said of markets where stocks have fallen more than 20 per cent. “The question is whether or not we see selling into this rebound, or can we continue to build on it.”
Gains on Thursday were capped by another abrupt downdraft in oil prices, which have collapsed amid the coronavirus pandemic.
Benchmark US crude oil fell USD2.33, or 9.3 per cent, to settle at USD22.76 per barrel after investors learned that Russia and members of OPEC had reached a preliminary agreement to reduce production by 10 million barrels a day. That is far short of what would be needed to offset the steep decline in demand because of the coronavirus shutdowns, said Dave Ernsberger, Global Head of Commodities Pricing at S&P Global Platts.
Brent crude fell USD1.36, or 4.1per cent, to USD31.48 per barrel.
Oil markets were closed yesterday as Saudi state TV reported that a deal before OPEC and other oil-producing countries involves a 10-million-barrel-per-day cut to July 1, then an eight-million-barrel-per-day cut through the end of the year. Saudi state TV also reported yesterday that beginning from 2021, the plan calls for a six-million-barrel-per-day cut for 16 months. In currency trading, the dollar fetched JPY108.42, down from 108.46 yen on Thursday. The euro edged higher to USD1.0942 from USD1.0931.