Global markets sink after Fed virus warning

BEIJING (AP) — Global markets and United States (US) stock futures declined yesterday after the Federal Reserve warned the coronavirus pandemic might threaten the modest economic recovery and kept interest rates near zero.

London and Frankfurt opened lower. Shanghai, Tokyo and Hong Kong retreated after spending part of the day in positive territory.

Lower interest rates and investor optimism about a possible coronavirus vaccine have helped global markets recover most of this year’s losses. But analysts said it might be too early to bet the recovery will persist, given the rising infection numbers in the US, Brazil and other countries.

On Wednesday, Fed Chairman Jerome Powell warned that rising US cases, which have led some state governments to reimpose anti-disease measures, threaten the modest recovery from the pandemic.

The Fed said it would keep buying USD120 billion of Treasury and mortgage bonds every month to encourage borrowing and spending, but Powell said Congress needs to take action. Legislators have yet to agree on aid after USD600 in weekly unemployment benefits for millions of Americans run out this week.

People walk past a bank’s electronic board in Hong Kong. PHOTO: AP

“The current situation is all about money in consumer pockets, which is precisely why fiscal policy is so much more important,” Stephen Innes of AxiTrader Corp said in a report.

In early trading, the FTSE 100 in London lost 1.4 per cent to 6,045.65 and Frankfurt’s DAX retreated two per cent to 12,565.75.

The CAC 40 in France declined 0.8 per cent to 4,917.54.

On Wall Street, futures for the benchmark S&P 500 index and the Dow Jones Industrial Average were one per cent lower.

On the S&P 500 index rose 1.2 per cent after the Fed’s rate announcement. The S&P 500, which was down 34 per cent earlier, is back within 3.8 per cent of its February record.

The Dow rose 0.6 per cent while the Nasdaq composite added 1.4 per cent.

In Asia, the Shanghai Composite Index lost 0.2 per cent to 3,286.82 and the Nikkei 225 in Tokyo gave up 0.3 per cent to 22,339.23.

The Hang Seng in Hong Kong tumbled 0.07 per cent to 24,710.59 after data Wednesday showed the territory’s economy shrank by nine per cent in the quarter ending in June.

The Kospi in Seoul advanced 0.2 per cent to 2,267.01 and Sydney’s S&P-ASX 200 added 0.7 per cent to 6,051.10. India’s Sensex shed 0.6 per cent to 37,847.47.

New Zealand and Jakarta advanced while Singapore and Bangkok retreated.

Also yesterday, Japan reported retail sales rose by a better-than-forecast 13.1 per cent in June over the previous month.

That means retail sales in one of the world’s biggest markets were only 0.9 per cent lower than in February before the crisis hit, Tom Learmouth of Capital Economics said in a report.

In the US, some companies are reporting quarterly results that exceed forecasts, though they still are well below pre-virus levels.

On Wednesday, Advanced Micro Devices rose 12.5 per cent after it reported stronger profit than Wall Street expected. Starbucks gained 3.7 per cent after it reported a loss that was not as bad as analysts were expecting.

Eastman Kodak surged 318.1 per cent, gaining for a second day after the company won a USD765 million government loan to launch a new business unit making pharmaceutical components.

Shares rose to USD33.20 from USD2.62 on Monday. Amazon added 1.1 per cent on Wednesday, Apple rose 1.9 per cent, Facebook gained 1.4 per cent and the Class A shares of Alphabet, Google’s parent company, were up 1.3 per cent.

Gold rose to USD1,953.50 per ounce from Wednesday’s USD1,953.40.

Benchmark US crude lost USD0.58 to USD40.69 per barrel in electronic trading on the New York Mercantile Exchange. The contract gained USD0.23 on Wednesday to USD41.27. Brent crude, used to price international oils, shed USD0.50 to USD43.59 per barrel in London.

The US dollar rose to JPY105.14 from JPY104.90 on Wednesday. The euro fell to USD1.1734 from USD1.1789.