Asia rides Wall Street surge as investors place hopes on US stimulus
March 25, 2020
TOKYO (Reuters) - Asian shares extended their rally on Wednesday in the wake of Wall Street’s massive rebound as the US Congress appeared closer to passing a $2 trillion stimulus package to mitigate the economic blow from the coronavirus pandemic. MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose 1.7% with Australian shares jumping 3.4% and South Korean shares .KS11 gaining 3.5%. Japan's Nikkei .N225 surged 4.8%. “Japanese shares have been bolstered by aggressive buying from the Bank of Japan and pension money this week. That has prompted hedge funds to cover their short positions,” said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities. On Tuesday, MSCI’s gauge of stocks across the globe .MIWD00000PUS rallied 8.39%, the largest single-day gain since the wild swings seen during the height of the global financial crisis in October 2008. It rose another 0.8% in Asia on Wednesday. On Wall Street, the Dow Jones Industrial Average .DJI soared 11.37%, its biggest one-day percentage gain since 1933. Yet, much of the large gains in stock markets pale in comparison with the brutal selloff of the past few weeks as investors braced for a deep global recession in the wake of sweeping lockdowns in many countries. U.S. S&P500 is still down almost 28% from its record peak hit just over a month ago. Wall Street futures EScv1 were down 1.1% in early Asian trade. “Many analysts have recently put out dire economic forecasts, like annualized rate of 20% fall in U.S. GDP next quarter. Europe and Japan should also see double-digit contractions,” said Nobuhiko Kuramochi, chief strategist at Mizuho Securities. “I suspect the outlooks have sunk in among market players already and that the bear market has run about 80% of its course for now.” Senior Democrats and Republicans in the divided U.S. Congress said on Tuesday they were close to a deal on a $2 trillion stimulus package to limit the economic damage from coronavirus pandemic. But it was unclear when they would be ready to vote on a bill. Investor fears about a sharp economic downturn appear to be easing somewhat after the US Federal Reserve’s offer of unlimited bond-buying and programs to buy corporate debt. “Companies will see their revenues sink and indebted firms will have trouble securing cash, so governments are making the right responses,” said Akira Takei, senior fund manager at Asset Management One. “The question is, while those responses are necessary in the near term, what if this continues? You can’t keep helping companies that continue to make losses. The longer this drags on, the more likely we will need to adjust to a new normal.” The biggest uncertainty is on how countries can slow the pandemic and how quickly they can lift various curbs on economic activity. US President Donald Trump pressed his case for a re-opening of the US economy by mid-April. But that met immediate scepticism given the rise of infections in the United States is now among the highest in the world, with the total cases reaching more than 50,000, doubling in less than 3 days recently.