Global markets climb on Fed cut

March 04, 2020: Stock markets bounded higher Wednesday after the US Federal Reserve sprang its first emergency rate cut since the global financial crisis to counter economic fallout from the coronavirus.

Wall Street also welcomed a strong showing by ex-vice president Joe Biden in the Democratic presidential primaries that boosted his chances against leftist Bernie Sanders.

In the first unscheduled rate reduction since 2008, the Fed chopped Tuesday its key interest rate by a half point to a range of 1.0-1.25, explaining that "coronavirus poses evolving risks to economic activity".

IMF chief Kristalina Georgieva followed up Wednesday with a forecast that global growth would slow below the 2019 level of 2.9 percent, underscoring that the COVID-19 outbreak "is no longer regional issue, it is a global problem (that) calls for global response."

The disease has so far killed more than 3,200 people and infected more than 93,000.

An International Monetary Fund statement said Wednesday that a special financial and monetary committee tracking the virus urged the fund "to use all its available financing instruments to help member countries in need."

Equities in Europe and Asia advanced as investors were reassured that stimulus measures were in the offing, dealers said.

"The financial market rollercoaster ride continues as risk appetite seems to be focusing on global stimulus bets, former-VP Biden's strong Super Tuesday, and on hopes that stocks are closer to a bottom," OANDA senior analyst Edward Moya commented.

In midday New York trading, the Dow Jones index was up by around 2.1 percent, which observers put down to a "political relief rally" after moderate Democrat Biden won big in the "Super Tuesday" presidential primaries.

In commodities, oil prices fell in late deals amid what one analyst called "posturing" by Russians and Saudis as delegates began arriving for a so-called OPEC+ meeting in Vienna aimed at slashing output to prop up prices.

- Sentiment stabilises -

"The volatility remains and markets will continue to be very vulnerable to sharp declines but the last few days offers some encouragement that full blown panic isn't setting in," said analyst Craig Erlam at OANDA

The deep cut in US rates was also followed by a statement from G7 finance ministers that they stood ready to take "appropriate actions... including fiscal measures" in response to the virus.

In Asia, the Tokyo stock market gained 0.1 percent, while Shanghai added 0.6 percent.

Seoul surged more than two percent as South Korea -- the worst virus-hit country outside China -- reported a sharp drop in new cases, and the government planned a $10-billion stimulus budget.

Hong Kong fell 0.2 percent after a gauge of manufacturing, construction, wholesale, retail and services activity in the city fell in February to its lowest level since records were first compiled in mid-1998.

The Fed rate cut sent yields on 10-year US Treasuries, a go-to asset in times of turmoil, below one percent for the first time on record. Gold, another fallback for worried investors, was fairly steady at $1,642.40

- Key figures around 1700 GMT -

• London - FTSE 100: UP 1.5 percent at 6,815.59 points (close)
• Frankfurt - DAX 30: UP 1.2 percent at 12,127.69 (close)
• Paris - CAC 40: UP 1.3 percent at 5,464.89 (close)
• EURO STOXX 50: UP 1.4 percent at 3,420.56
• New York - Dow: UP 2.1 percent at 26,448.59
• Tokyo - Nikkei 225: UP 0.1 percent at 21,100.06 (close)
• Hong Kong - Hang Seng: DOWN 0.2 percent at 26,222.07 (close)
• Shanghai - Composite: UP 0.6 percent at 3,011.67 (close)
• Dollar/yen: UP at 107.38 yen from 107.13 yen at 2200 GMT
• Euro/dollar: DOWN at $1.1127 from $1.1173
• Pound/dollar: UP at $1.2845 from $1.2811
• Euro/pound: DOWN at 86.63 pence from 87.22 pence
• Brent Crude: DOWN 0.9 percent at $51.42 per barrel
• West Texas Intermediate: DOWN 0.3 percent at $47.04

AFP/APP