Stocks slide and dollar rally runs as economic realities bite

SINGAPORE (Reuters) – Asia’s stock markets retreated from their highest levels for a month and the dollar extended gains on Thursday as the damage the coronavirus has wrought on the world economy soured appetite for risk.

Data showed U.S. retail sales fell the most on record last month and manufacturing output fell by the most in 74 years, raising fears of a deep recession. Another sky high figure is expected when U.S. weekly jobless claims land later in the day.

E-mini futures for the S&P 500 ESc1 fell half a percent in Asia after a 2.2% drop on the index .SPX on Wednesday and European futures were marginally lower STXEc1 FFIc1.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS lost about 1%, wiping out early week gains that had taken the index to its best level since mid-March.

“Markets seem to have run out of good news to trade off,” said Kyle Rodda, analyst at IG Markets in Melbourne.

“They are still effectively betting on the global economy springing out of this in an energetic fashion, but the challenge is that no-one can give with any level of certainty what the future is going to be like.”

The risk-sensitive Australian dollar AUD=D3 fell to a one-week low and oil prices struggled to rise against the expectation of cratering demand.

U.S. crude CLc1 sat at $19.90 per barrel, 70 cents above an 18-year low hit on Wednesday, and Brent crude LCOc1 rose 28 cents or 1% in Asian trade to $27.92 per barrel.

The International Monetary Fund is predicting zero growth in Asia this year for the first time in 60 years, as exporters are pounded by slumping demand and anti-virus measures force consumers to stay home and shops to shut down.

China is expected to report on Friday that the health crisis likely knocked its economy into its first decline on record.

In Japan, where a Reuters survey showed most firms feel stimulus measures announced so far were insufficient, the Nikkei .N225 fell 1.3%.

Benchmark indexes in Australia , Hong Kong .HSI and Shanghai .SSEC also posted falls between 0.4% and 1.3% and emerging markets fell harder.

“A recovery timeline…remains impossible to predict,” said Ronald Lam, chief customer officer at airline Cathay Pacific (0293.HK), which has slashed nearly all its passenger capacity and lost a fifth of its value this year.

CURRENCIES CAUTIOUS

Millions more Americans likely sought unemployment benefits last week, lifting total filings for claims over the past month above an astounding 20 million.

Official data is due at 1230 GMT, with a weekly figure of 5.1 million expected.

The U.S. dollar extended its rally against the risk-sensitive Antipodean currencies, for its best two-day gains against the Australian and New Zealand dollars in a month.

It rose on the yen, euro and pound and last bought 107.94 yen JPY= and traded at $0.6273 per Aussie AUD=D3 and $1.0875 per euro EUR=.

Benchmark 10-year U.S. Treasury yields US10YT=RR were pinned at 0.6456%, more than 100 basis points below where they began the year.

The path to an economic re-start and the effectiveness of gigantic stimulus packages around the world is also unclear.

In the United States, the hardest-hit nation, the coronavirus death toll topped 30,000 on Wednesday and set a record single-day increase for the second day running.

President Donald Trump said he would announce guidelines for reopening the economy on Thursday, however, state governors – especially on the East Coast – seem to be pushing for a cautious approach.

“Markets are looking for the peak in the viral spread, but this is only the start of a very bumpy road back to economic strength,” said Kerry Craig, global market strategist at J.P. Morgan Asset Management.

“Investors should remain vigilant to what the market is pricing and realise that market rallies in a longer bear market are not unusual.”