U.S. Futures, Stocks Give Up Gains as Bonds Rally: Markets Wrap

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(Bloomberg) — U.S. index futures erased gains and European stocks turned lower on Monday, with markets struggling to end the worst equity rout since the financial crisis even as central banks pledged action to safeguard economies from the coronavirus. Bonds extended a rally and oil advanced.

Contracts on the S&P 500 Index still pointed to a firm open on Wall Street, though they had rallied strongly earlier in the day. The Index also gave up a big early jump as the benchmark guage tumbled in Italy, the region’s epicenter for virus cases.

The attempt at a bounce earlier followed a rare statement on Friday from the Federal Reserve that opened the door to a rate cut based on the “evolving risks” posed by the outbreak. Central banks in Japan and the U.K. followed suit with supportive messages. Money market traders expect the European Central Bank to ease rates by 10 basis points in April. Most European bonds gained, tracking Treasuries that rallied for an eighth day. The dollar slipped against the euro and most major currencies.

Investors are weighing the central bank comments against pessimism from economists on global growth amid fears that the virus will trigger further retrenchment after it pushed the S&P 500 Index to its worst week since 2008. China’s CSI 300 Index jumped 3.2% on Monday, even after the nation saw a much deeper contraction in manufacturing than forecast.

“We’ll start to see more rhetoric from governments to address the situation both from a fiscal and central bank easing standpoint,” said Damien Loh, chief investment officer at Ensemble Capital Pte in Singapore. “We might see one leg of risk-off but it feels to me most of the bad news has been priced in.”

The global death toll from the virus has surpassed 3,000. U.S. cases climbed over the weekend, with the first infections appearing in New York City, Brussels and Berlin, while cases jumped in hot spots of Italy and South Korea. U.S. President Donald Trump is set to meet with pharmaceutical industry executives at 3 p.m. Washington time Monday.

Elsewhere, Australian and New Zealand 10-year bond yields hit fresh record lows.

Here are some key events coming up:

  • A key factory gauge on Monday is projected to show that U.S. manufacturing came close to stagnating last month. The ISM purchasing managers index is estimated to fall to 50.5 from 50.9.
  • The Reserve Bank of Australia sets policy on Tuesday.
  • U.S. citizens in states including California and Texas will vote on “Super Tuesday” for a Democratic candidate to run against President Donald Trump in November’s election.
  • The Bank of Canada has a rate decision on Wednesday.
  • OPEC ministers gather in Vienna on March 5-6.

These are the main moves in markets:

Stocks

  • Futures on the S&P 500 Index were little changed at 6:07 a.m. New York time.
  • futures climbed 0.3%.
  • The Stoxx Europe 600 Index fell 0.2%.
  • Italy’s sank 2.4%.
  • The MSCI Asia Pacific Index climbed 0.8%.

Currencies

  • The Bloomberg Dollar Spot Index declined 0.2%.
  • The euro increased 0.5% to $1.1086.
  • The British pound decreased 0.4% to $1.2777.
  • The Japanese yen strengthened 0.2% to 107.67 per dollar.
  • The South Korean Won appreciated 1.8% to 1,193.57 per dollar.

Bonds

  • The yield on 10-year Treasuries decreased eight basis points to 1.07%.
  • The yield on two-year Treasuries decreased 18 basis points to 0.73%.
  • Germany’s 10-year yield fell six basis points to -0.66%.
  • Australia’s 10-year yield declined one basis point to 0.808%.

Commodities

  • West Texas Intermediate crude jumped 1% to $45.19 a barrel.
  • Iron ore jumped 5.6% to $86.88 per metric ton.
  • LME advanced 0.4% to $5,657.50 per metric ton.
  • LME aluminum climbed 0.2% to $1,698.50 per metric ton
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