Asian stocks fell after the biggest one-day slide in equities on Wall Street since 2008, while the yen retreated and oil rose along with bond yields after Monday’s seismic shocks.
U.S. futures saw modest gains after the S&P 500 Index plummeted almost 8%, a rout that bled into Asian equities. Japanese shares slid more than 3%, while Australian and Korean stocks saw more modest losses. Ten-year Treasury yields rose after crashing to all-time lows, and crude advanced after a 25% collapse.
S&P 500 futures Tuesday briefly traded down 20% from their high — signaling a bear market — then gained after President Donald Trump said that the administration will discuss a possible payroll tax cut with Congress, and that there will be “major” economic announcements Tuesday. Treasury Secretary Steven Mnuchin rejected comparisons with the financial crisis.
Measures to contain the coronavirus continue to undermine prospects for corporate earnings, and raise the danger of a funding crisis. Making things worse, the crash in oil prices threatens a swathe of defaults in that industry. On the coronavirus front, Italy added nationwide travel restrictions to its effective lockdown of the northern region of the country.
In a dramatic day Monday across assets globally:
- The U.S. rout began at the open, with losses reaching 7% four minutes in, triggering NYSE circuit breakers that halted trading for 15 minutes.
- Crude tumbled the most since the Gulf War in 1991, after an OPEC+ alliance that had contained global production disintegrated. WTI and Brent slumped by about 25%.
- The 10-year Treasury yield fell below 0.5% before climbing back to 0.57%, and the 30-year yield dropped under 0.9%, taking the whole U.S. yield curve below 1% for the first time in history.
- A U.S. derivatives index that measures the perceived risk of corporate credit surged by the most since Lehman Brothers collapsed.
“While things feel like the end-of-days I’d stay risk averse in the near-term, but expect bear market rallies,” Chris Weston, head of research at Pepperstone Group, said.
Here are some key events coming up:
- The European Central Bank’s policy decision comes Thursday amid expectations it may ease policy.
- The U.K. Chancellor of the Exchequer unveils the government’s 2020 budget on Wednesday.
- The U.S. core consumer price index, due Wednesday, is expected to remain subdued in February.
These are the main moves in markets:
Stocks
- Futures on the S&P 500 gained 1.5% as of 8:40 a.m. in Tokyo. The S&P 500 Index sank 7.6% to the lowest since June.
- Topix index fell 1.7%.
- S&P/ASX 200 Index fell 0.8%.
Currencies
- The euro was at $1.1427, down 0.5%. It rose 1.5% Monday.
- The Japanese yen fell 0.7% to 103.11 per dollar.
Bonds
- The yield on 10-year Treasuries rose 9 basis points to 0.63%.
- Australia’s 10-year bond yield rose three basis points to 0.64%.
Commodities
- Gold fell 0.9% to $1,665.78 an ounce.
- West Texas Intermediate rose 5% to $32.62 a barrel.
— With assistance by Vildana Hajric
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