Asia-Pacific stocks rose as a flurry of support packages from central banks in response to the coronavirus crisis handed markets a reprieve from this week’s brutal sell-off.
Share indices in Australia, China and South Korea all jumped on Friday, but traders warned that any rebound was likely to be temporary until there were more signs that the pandemic’s spread was stalling.
“Markets remain very volatile and the outbreak of Covid-19 in the West is still at an early stage,” said Rodrigo Catril, a senior markets strategist at National Australia Bank in Sydney.
“The full extent of the negative economic consequences from containment measures remains uncertain,” he added.
Australia’s S&P/ASX 200 added 3.6 per cent as the stock index rebounded from a more than six-and-a-half year low. South Korea’s Kospi benchmark was 4 per cent higher. That index closed 8.4 per cent lower the previous day, triggering market circuit breakers and trading halts.
Hong Kong’s Hang Seng rose 3.2 per cent, while China’s CSI 300 of Shanghai- and Shenzhen-listed stocks was up 0.8 per cent. Japan’s equity markets are closed for a public holiday.
A raft of central bank interventions have sought to stem the economic hit from the spread of coronavirus, which threatens a global recession this year.
The result was relative calm on Wall Street overnight, with the S&P 500 stock index closing 0.5 per cent higher. London’s FTSE 100 gained 1.4 per cent.
Policymakers’ interventions also helped to calm government bond and currency markets in Asia on Friday. The yields on 10-year Australian treasuries fell 0.19 percentage points after the Reserve Bank of Australia said it would buy up to A$5bn ($2.9bn) in treasuries. Bond prices rise as yields fall.
Asia-Pacific currencies, which have this week been slammed by a surging dollar as corporates and banks hoard dollars, stabilised.
The Australian dollar recovered 1.4 per cent against the greenback, while South Korea’s won gained more than 2 per cent. Overnight, the Fed rolled out dollar swap lines with central banks including the RBA and Bank of Korea.
“Central bank measures and Fed extensions of swap lines are all welcome measures,” said NAB’s Mr Catril. “But we have to be cautious about reading too much positivity in what is currently a very illiquid market.”
Futures trading during Asian hours tipped the S&P 500 to open about 0.9 per cent lower later in the day.
The price of West Texas Intermediate crude — the US oil benchmark — rose 4.5 per cent to $26.35 per barrel. On Thursday, WTI crude surged 25 per cent in its biggest one-day gain on record. Brent, the international benchmark, fell added 1.5 per cent to $28.90.
Crude prices have plunged in recent weeks on fears over the economic impact of coronavirus and a price war between large producers Saudi Arabia and Russia.
“There is a risk that heightened uncertainty is with us for some time,” said Daniel Been, head of currency research at ANZ. He added that any sustained recovery depended on a slowdown in coronavirus infection rates. “We remain cautious.”