Sydney& Mumbai:
Indian stocks plunged over 9% on Monday, as the rapidly spreading coronavirus pandemic sent major states including the country’s capital into a lockdown amid increasing fears that outbreak could bring world economies to a grinding halt.
The Nifty slipped 9.17% to 7,937.75 by 0408 GMT, while the Sensex was 9.42% lower at 27,093.24.
Over the weekend in India, the virus drove several companies to shut operations and the government sent states into lockdowns, bringing normal life to a grinding halt.
India has already registered 415 cases of coronavirus, with seven deaths.
“Panic has gone up domestically because of the lockdown situation,” said Vinod Nair, head of research at Geojit Financial Services.
“There is fear that the situation will not be brought under control soon.”
The rupee hit a fresh record low of 76.05 against the dollar, as a flight into cash and worries about tightening liquidity boosted demand for the world’s reserve currency.
After market hours on Friday, the Securities and Exchange Board of India halved position limits for certain stock futures, restricted short-selling of index derivatives and raised margin rates for some shares to curb “abnormally high” volatility amid the pandemic.
In domestic trading, the Nifty PSU Bank Index plunged 8%, while the Nifty bank index crashed nearly 10%.
The Nifty Auto Index slid 9% after several carmakers over the weekend suspended production due to the virus.
“The Indian markets are reacting to what’s happening globally, and while some stocks look compelling after the correction, it is still early to predict if equities have ebbed or there could be more fall,” cautioned Sunil Singhania, founder, Abakkus Asset Management.
Asian Stocks
Meanwhile, global markets crumbled, with MSCI’s broadest index of Asia-Pacific shares outside Japan sliding nearly 4% as the global death toll climbed to over 14,000, further battering economic activity, and raising fears of a global recession.
Asian shares sank on Monday as a rising tide of national lockdowns threatened to overwhelm policymakers’ frantic efforts to cushion what is likely to be a deep global recession.In a foretaste of the pain to come, E-Mini futures for the S&P 500 dived 5% at the open to be limit down, while EUROSTOXXX 50 futures tumbled 6.4%.
MSCI’s broadest index of Asia-Pacific shares outside Japan lost 3.8%, with New Zealand’s market shedding a record 10% as the government closed all non-essential businesses.
Shanghai blue chips dropped 2.3%, though Japan’s Nikkei rose 0.8% aided perhaps by expectations of more aggressive asset buying by the Bank of Japan.
There was little to cheer in coronavirus news as the global death toll exceeded over 14,000 with more than 300,000 infections.
Airlines cancelled more flights as Australia and New Zealand advised against non-essential domestic travel, the United Arab Emirates (UAE) halted flights for two weeks and Singapore and Taiwan banned foreign transit passengers.
Nearly one in three Americans were ordered to stay home on Sunday to slow the spread of the disease, while Italy banned internal travel as deaths there reached 5,476.
U.S. President Donald Trump went on TV to approve disaster deceleration requests from New York and Washington, while St. Louis Federal Reserve President James Bullard warned unemployment could reach 30% unless more was done fiscally.
Analysts are dreading data on weekly U.S. jobless claims due on Thursday amid forecasts they could balloon by 750,000, and maybe by more than a million.
U.S. stocks have already fallen more than 30% from their mid-February peak and even the safest areas of the bond market are experiencing liquidity stress as distressed funds are forced to sell good assets to cover positions gone bad.
WAITING ON THE DISEASE
“It would be a brave, or foolish, man to call the bottom in equities without a dramatic medical breakthrough,” said Alan Ruskin, head of G10 FX strategy at Deutsche Bank.
Also needed would be evidence that China could re-emerge from the pandemic without reigniting infections, and that other major economies had hit inflection points for infection rates, he added.
“Even were social distancing to subside at the earliest plausible dates in Europe and the U.S., it will have done extraordinary damage to confidence in a host of key sectors,” Ruskin said.
The mounting economic toll led to a major rally in sovereign bonds late last week, with efforts by central banks to restore liquidity in the market allowing for more two-way trade.
Yields on the benchmark U.S. 10-year note were down at 0.80%, having dived all the way to 0.84% on Friday from a top of 1.28%.
In New Zealand, the central bank announced its first outright purchase of government paper aiming to inject much-needed liquidity into the local market.
In currency markets, the first instinct on Monday was to dump those leveraged to global growth and commodity prices, sending the Australian dollar down 0.8% to $0.5749.
The U.S. dollar started firm but took a step back after partisan battles in the U.S. Senate stopped a coronavirus response bill from advancing.
The dollar eased 0.5% to 110.23 yen, while the euro recouped losses to be up 0.1% at $1.0707.
Against a basket of currencies the dollar was still a fraction firmer at 102.510.
The dollar was a major gainer last week as investors fled to the liquidity of the world’s reserve currency, while some funds, companies and countries desperately sought more cash to cover their dollar borrowings.
“Further dollar strength would not be helpful for the U.S. or global economies, and in our view policymakers should consider direct intervention, in addition to further enhancements to central bank USD liquidity facilities,” said analysts at Goldman Sachs in a note.
“We expect the dollar to remain firm against most crosses until policymakers intervene and/or market conditions begin to stabilize.”
The steady rise in the dollar undermined gold, which slipped 0.3% to $1,493.83 per ounce.
Oil prices turned mixed after opening sharply lower. Brent crude futures slipped 69 cents to $26.29 a barrel, while U.S. crude gained 30 cents to $22.93. [O/R]