Yuan Drops With Aussie on Virus Fear, Economy Woes: Markets Wrap

Financial markets kicked off the week with renewed pessimism after data showed the Chinese economy is struggling with its coronavirus-induced shutdown and new fatalities were reported across the world. The offshore yuan sank with the Australian dollar.

The offshore yuan retreated after data over the weekend showedactivity contracted sharply last month. The yen climbed as the recent clamor for haven assets showed no signs of letting up, and the Aussie dollar plumbed fresh 11-year lows as investors ramped up bets for more monetary stimulus. The Federal Reserve said late Friday it’s open to action, with traders now pricing in more cuts on top of last year’s three reductions.

With fatalities from coronavirus registered in the U.S., Thailand and Australia over the weekend and new cases still spiraling in Italy and Iran, traders began the week on edge.

Goldman Sachs Group Inc. economists now expect the virus to inflict a “short-lived global contraction” on the world economy that forces the Fed to slash rates in the first half. Fed Chairman Jerome Powell has opened the door to a rate cut, citing the “evolving risks” posed to the U.S. economy from the virus, in a rare statement issued Friday.

“Markets face significant uncertainty in the short term and remain at high risk of more downside given the unknowns around Covid-19,” said Shane Oliver, a global investment strategist at AMP Capital Investors Ltd. in Sydney. Concern remains that “it will disrupt economic activity more deeply and for longer than had been expected a week or so ago.”

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Here are some key eventscoming up:

  • A key factory gauge on Monday is projected to show that U.S. manufacturing came close to stagnating last month. The ISM’s purchasing managers index is estimated to fall to 50.5 from 50.9.
  • The Reserve Bank of Australiasets policy on Tuesday.
  • U.S. citizens in states including California and Texas will vote on “Super Tuesday” for a Democratic candidate to run against President Donald Trump in November’s election.
  • The Bank of Canada has a rate decision on Wednesday.
  • OPEC ministers gather in Vienna on March 5-6.

These are the main moves in markets:

Stocks

  • The S&P 500 fell 0.8% on Friday.
  • Futures on Japan’s Nikkei 225 slipped 0.9% in Chicago on Friday.
  • Hang Seng futures lost 1.4% on Friday.
  • Futures on Australia’s S&P/ASX 200 Index slid 0.6% on Friday.

Currencies

  • The yen rose 0.5% to 107.34 per dollar.
  • The Aussie lost 0.6% to 64.77 U.S. cents.
  • The offshore yuan declined 0.2% to 6.9953 per dollar.
  • The euro added 0.1% to $1.1037.

Bonds

  • The yield on 10-year Treasuries lost 11 basis points to 1.15% on Friday.

Commodities

  • West Texas Intermediate crude sank 5% on Friday to $44.76 a barrel.
  • Gold fell 3.6% to $1,585.69 an ounce on Friday.

— With assistance by Lin Zhu

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