INSUBCONTINENT EXCLUSIVE:
SINGAPORE: The rout in world stocks deepened on Monday, with investors rattled by weekend data from China that showed its fastest ever
contraction in factory activity, raising fears of a global recession from the coronavirus.
Pandemic fears pushed markets off a precipice
last week, wiping more than $5 trillion from global share value as stocks posted their steepest slump in more than a decade.
The sheer scale
of losses has prompted financial markets to price in policy responses from the US Federal Reserve to the Bank of Japan and the Reserve Bank
of Australia.
Futures now imply a full 50 basis point cut by the Fed in March while Australian markets are pricing in a quarter-point cut at
the RBA's Tuesday meeting.
In equities, e-minis for the S-P500 declined more than 1 per cent
MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.3 per cent.
Japan's Nikkei opened 1.3 per cent lower at a six month trough
Australia's S-P ASX/200 fell 3 per cent and New Zealand's NZ50 slid 3 per cent into correction territory.
Benchmark US 10-Year Treasuries
hit a fresh record low of 1.0750 per cent.
"There had been a lot of hope that today's market might open somewhat positive given the finish
to the US market," said Jun Bei Liu, portfolio manager at Tribeca Investment Partners in Sydney, referring to Friday's late climb from
intraday lows on Wall Street.
"But the China PMI was significantly weaker than expected, and so we're seeing the continuation of the sell
off," she said.
"Right now the problem is (the virus) is growing exponentially (beyond China), as an equity investor we're just not sure of
what the ultimate demand impact is."
Leaders in Europe, the Middle East and the Americas rolled out bans on big gatherings and stricter
travel restrictions over the weekend as cases of the new coronavirus spread.
The epidemic, which began in China, has killed almost 3,000
people worldwide as authorities race to contain infections in Iran, Italy, South Korea and the United States.
China on Saturday reported its
fastest ever contraction in factory activity.
"It is now highly probable that the coronavirus will spread globally," Citi analysts said in a
note
"Financial markets may over-react until they have visibility on the actual impact."
Investor panic last week sent bonds soaring and
The S-P 500 index fell 11.5 per cent, only its fifth double-digit weekly percentage drop since 1940.
Oil prices dropped to their lowest in
more than a year and even gold plunged as holders liquidated what they could to cover margin calls on riskier investments.
On Monday, oil
extended losses before steadying on expectations OPEC may cut production.
Brent crude last traded at $49.72 per barrel and US crude at
$44.89 per barrel.
In currencies, investors sought shelter in the Japanese yen, which jumped to a 20-week high on the dollar in tandem with
the massive shift in money markets to price US rate cuts.
All of this leaves just about every major asset class on edge and few analysts
sounding optimistic.
"So it was right not to 'buy the dip,'" said Michael Every, Rabobank's senior strategist for the Asia-Pacific.
The yen
was last up 0.3 per cent at 107.74.
The Aussie huddled near an 11-year low at $0.6551, while the New Zealand dollar slid 0.3 per cent to
$6225.
The euro was up 0.3 per cent at $1.1054.
That left the dollar index steady at 97.957.
China's Caixin Purchasing Managers Index (PMI),
due at 0145 GMT, and PMI figures from around the world due later on Monday will add more detail to the picture of economic pain.
Later in
the week, central bank meetings in Australia, on Tuesday, and Canada, on Wednesday, will be closely watched.