GRAPHIC-Three months that shook global markets

(Updates with latest market moves)

By Marc Jones

LONDON, March 31 (Reuters) – How much damage has the coronavirus and the oil price collapse inflicted on global financial markets this year? Put simply, it has probably been the most destructive sell-off since the Great Depression.

The numbers have been staggering. $12 trillion has been wiped of world stock markets, oil has slumped 60% as Saudi Arabia and Russia have started a price war and emerging markets like Brazil, Mexico and South Africa have seen their currencies plummet more than 20%.

Volatility and corporate borrowing market stress has spiked on worries that whole sectors could go bust, airlines have had half their value vaporised, while cratering economies risk a new wave of government debt crises.

“It has been like a train wreck,” Chris Dyer, Director of Global Equity at Eaton Vance, said. “You could see it coming and coming and coming, but you just couldn’t stop it happening.”

That carnage has seen 22% and 20% slumps for Wall Street’s Dow Jones and S&P 500, over 23% for MSCI 49-country world index and 26% for London’s internationally exposed FTSE.

For reference, the record quarterly drop for Wall Street was 40% in 1932 in the midst of the Great Depression. The fact that the S&P and Dow were at record highs back in mid February has made the crash this time seem more brutal.

Stocks in China, where the virus hit first, have faired relatively well in comparison with only an 11% drop in dollar terms, but the impact on other major emerging markets has been devastating as their main commodity markets, and currencies, have also collapsed.

Russian stocks, which topped the tables last year, have been routed 40% in dollar terms. South Africa, which was stripped of its last investment grade credit rating on Friday, has fallen by the same percentage, though Brazil has been the worst, plunging 50%.

A large part of that is down to some wild FX market moves. All three of those countries have seen their currencies lose over 20% this year, which also ties in to the commodity market carnage.

Brent crude oil has fallen by 65% in the quarter to just $25 a barrel. This was not only because of the coronavirus crisis, but also the price war between Saudi Arabia and Russia, which is putting their public finances at risk.

Industrial metals like copper, aluminium and steel have all dropped 15-22% and some agricultural staples like coffee and sugar are down 17% and 10%.

“These are truly historical moments in the history of financial markets. 2020 will go alongside 1929, 1987 and 2008 in the text books of financial market panics,” Deutsche Bank Strategist, Jim Reid, said.

GIVE ME SHELTER

So are there any places to shelter? Yes, but not many.

Sit-on-your-sofa-suited stocks like Netflix and Amazon have risen 14.5% and 6.5% respectively and some specialist medical equipment companies have surged.

Ultra-safe U.S. government bonds have returned 12% as the Federal Reserve cut U.S. interest rates to effectively zero, leading a charge of around 62 interest rate cuts globally.

The dollar has rocketed against emerging market currencies. It had also shot up against the majors too, but has eased back over the last two weeks and will end the quarter only 3% up against those bigger currencies.

This has left the Japanese yen, the other traditional FX safe-haven, with only a 0.5% gain. The Swiss franc is down against the dollar, although it has climbed steeply against the euro and many other currencies.

Will April bring much relief? JPMorgan reckons the coronavirus will have pushed the world economy into a 12% contraction in Q1 and with pandemic still spreading rapidly and keeping large parts of the global economy shuttered it is unlikely to get much easier in Q2.

The cavalry has arrived though. G20 governments have promised a $5 trillion revival effort, major central banks have cut rates and restarted asset purchases. Markets bounced big last week until Friday came and may still end Q1 on a relative high.

Stephane Monier, Chief Investment Officer of Lombard Odier, is looking to see whether infection rates in Europe and elsewhere peak as they did in Asia. If they do, markets could see a V-shaped 30% recovery, although if they do not and cases jump in Asia again as lockdowns are lifted, it could be akin to a “war” situation which would impact the economy for 1-1/2 years.

“Our expectation is for a very volatile second quarter,” Monier said. “It is important to keep in liquid, high-quality assets.”

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MORNING BID-Goodbye to a nightmarish quarter

A look at the day ahead from EMEA senior markets correspondent Tommy Wilkes. The views expressed are his own.

It’s the end of the most calamitous quarter for world stocks since 2008. For European stocks you have to go back even further – to 2002. With world markets having seen $10 trillion wiped off their value in March and policymakers responding with more than $10 trillion-plus of stimulus packages, a semblance of calm has returned. In fact, talk is of another U.S. stimulus package being thrashed out.

Much better-than-expected factory data out of China held out hope of some sort of post-lockdown economic revival, even as the rest of the world closes shop. Some analysts, such as Morgan Stanley, have been bold enough to call the bottom in stocks and say the lows of early last week are unlikely to be revisited, with now looking like a great buying opportunity.

Whether that proves right or not will depend in large part on when investors see a peak in infection rates. Signs are mixed. The number of new infections in Italy is declining. But worldwide, infections exceed 770,000, with the epicentre shifting to the United States where infections and deaths are rising rapidly. Even in the Asia-Pacific region, a World Health Organization official on Tuesday warned the epidemic was “far from over”.

Stocks were headed modestly higher on Tuesday after a positive Monday, with Wall Street rallying into the close. The S&P 500 is now within a whisker of a 20% rise from its lows of just 5 days ago. Strictly speaking, that would mark a new bull market, but probably best not to read too much into that bounce, given the index remains 22% below late-February highs.

Asian shares managed a small rally after the strong Chinese PMI figures, with MSCI’s Asia-Pacific share index excluding Japan up more than 1%. It is still down 21% for the quarter though. S&P 500 futures gained 0.4% while a pan-European equity index has opened 1% higher. Emerging stocks and currencies are up for the first time in three sessions, though equities are looking at their worst month since 2008.

Clearly, much bad news has been priced in. The VIX, dubbed Wall Street’s “fear” index, is still very elevated at 57 but down from levels above 80 earlier in the month.

Another reassuring sign is that oil prices are recovering from Monday’s slide to 18-year lows, after the United States and Russia agreed to talks to stabilise energy prices which fell at one point below $20 a barrel. But on the quarter, Brent crude futures are down a whopping 65%, their worst quarter ever.

On currency markets, the dollar is climbing again, but it’s a more contained rise than the jumps earlier this month which put severe stress on currency funding markets. Measured against a basket of currencies, the greenback has risen 1% this week but remains well off recent highs. Still the jury is out on whether the dollar is done flexing its muscles.

The euro, sterling and yen all fell as the greenback rose. There was little respite for battered emerging market currencies either, with the South African rand close to the record lows of Monday after its credit rating was downgraded to junk.

Government bond markets have also calmed, and encouragingly, Italian yields were mostly stable before a key auction as the country’s battle against the coronavirus seems to make progress. Yields in other markets such as Germany were modestly higher.

In the corporate world, Tuesday brought another batch of coronavirus headlines and dividend cuts, with the latest to slash their shareholder payouts French luxury group Hermes and Ad giant WPP. There were warnings from the likes of chocolatier Lindt & Spruengli which scrapped its 2020 targets, while Shell said it would write down $800 million in Q1 due to the oil slump. On airlines, Norway’s regulator gave the nod to credit bailout for the sector.

If anyone had any doubts, there was further confirmation of the hit M&A activity is taking from news that Altice Europe was dropping its bid interest in Israel’s Partner Communications.

In emerging markets, MSCI main equity index is up 1.5% but that’s little compensation for the 16.4% monthly fall and 25% loss on the quarter.

Mexico’s peso is set for its worst month since December 1994, the year of the “tequila crisis”, forcing authorities to activate a currency swap mechanism established with the U.S. Federal Reserve.

In some positive news, Ukrainian lawmakers voted to lift a ban on sales of farmland, clearing a hurdle to unlock an $8 billion International Monetary Fund loan package. (Editing by Andrew Cawthorne)

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Airlines must suggest possible U.S. compensation for grants -Treasury

WASHINGTON, March 30 (Reuters) – The U.S. Treasury Department issued guidelines on Monday to airlines and airport contractors as it prepares to quickly hand out $32 billion in cash assistance.

Airlines and contractors must “must identify financial instruments” that would “provide appropriate compensation,” Treasury said, adding that it could include “warrants, options, preferred stock, debt securities, notes, or other financial instruments issued by the applicant.”

The department told applicants to apply by April 3 at 5 p.m. to receive funds as soon as possible. Congress approved legislation last week authorizing $25 billion for passenger airlines, $4 billion for cargo carriers and $3 billion in cash for airport contractors like caterers and airplane cleaners. (Reporting by David Shepardson and Tracy Rucinski)

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GLOBAL MARKETS-Asia shares under threat as futures fall early

* Asian stock markets : tmsnrt.rs/2zpUAr4

* Futures for S&P 500, Nikkei fall in early trade

* Treasury yields fall further as central banks ease

* Dollar down for the moment, oil under pressure

By Wayne Cole

SYDNEY, March 30 (Reuters) – Asian share markets looked set for a rocky start on Monday as U.S. stock futures took an early spill amid fears the global shutdown for the coronavirus could last for months, doing untold harm to economies.

E-Mini futures for the S&P 500 skidded 1.7% right from the bell, while Nikkei futures pointed to an opening loss of around 500 points.

Central banks have mounted an all-out effort to bolster activity with rate cuts and massive asset-buying campaigns, which has at least eased liquidity strains in markets.

Canada’s central bank on Friday surprised with an emergency rate cut to 0.25% and a program of quantitative easing, while New Zealand policy makers on Monday launched a loan program for corporates to meet liquidity needs.

Rodrigo Catril, a senior FX strategist at NAB, said the main question for markets was whether all the stimulus would be enough to help the global economy withstand the shock.

“To answer this question, one needs to know the magnitude of the containment measures and for how long they will be implemented,” he added.

“This is the big unknown and it suggests markets are likely to remain volatile until this uncertainty is resolved.”

With that in mind, it was not encouraging that British authorities were warning lockdown measures could last months.

While President Donald Trump had talked about reopening the U.S. economy for Easter, on Sunday he extended guidelines for social restrictions to April 30 and said the peak of the death count from the respiratory disease could be two weeks away.

Bond investors looked to be bracing for a long haul with yields at the very short end of the curve turning negative and those on 10-year notes dropping a steep 26 basis points last week to 0.67%.

Early on Monday, Treasury futures climbed anew and pointed to a fresh fall in yields.

That drop has combined with efforts by the Federal Reserve to pump more U.S. dollars into markets, and dragged the currency off recent highs.

Indeed, the dollar suffered its biggest weekly decline in more than a decade last week.

Against the yen, the dollar was pinned at 107.80, well off the recent high at 111.71. The euro was firm at $1.1118 after rallying more than 4% last week.

The retreat in the dollar proved a fillip for gold, which was up 0.4% on Monday at $1,625.18 an ounce.

It has been little help for oil as Saudi Arabia and Russia show no signs of backing down in their price war.

Brent crude futures lost 89 cents to $24.04 a barrel, while U.S. crude fell 96 cents to $20.55.

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Russian central bank allocates $2 bln for small, medium firms to pay salaries

MOSCOW, March 27 (Reuters) – The Russian central bank said on Friday it would channel up to 150 billion roubles ($1.92 billion) to small- and medium-sized companies to ensure flawless payments of salaries, as part of the state measures amid the coronavirus outbreak.

The central bank will also provide loans to banks at a rate of 4% for one year to ensure payment of salaries, as Russia prepares to shut many businesses during a week-long holiday the country will observe to limit the spread of the coronavirus.

To support market liquidity, the central bank said it would offer 500 billion roubles in repo operations, taking into account the span of non-working days from March 30 to April 3. ($1 = 78.2910 roubles) (Reporting by Andrey Ostroukh; Editing by Jon Boyle)

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UPDATE 2-Ontario sees wider budget deficit as it provides C$17 bln coronavirus aid

(Adds economist quotes and details on budget) (y)

By Fergal Smith

TORONTO, March 25 (Reuters) – The Canadian province of Ontario, the world’s biggest sub-sovereign debtor, forecast on Wednesday a jump in its 2020-21 budget deficit as it provides a C$17 billion ($12 billion) financial package in response to the coronavirus outbreak.

Canada’s most populous province and economic engine forecast a deficit of C$20.5 billion in the fiscal year beginning on April 1, including a C$2.5 billion reserve, an economic update from the Progressive Conservative government showed. That compares with an estimated deficit of C$9.2 billion for 2019-20.

Ontario scrapped its initial plans to release its budget on Wednesday because of the virus outbreak and instead provided an economic update.

The C$17 billion package includes C$7 billion to support the health care system, people and jobs, as well as C$10 billion through deferring taxes and other payments, the update said.

“We will do whatever it takes to protect people’s health and protect Ontario’s economy,” Ontario Finance Minister Rod Phillips said.

This week Ontario announced the shutdown of all non-essential businesses for at least two weeks, in an effort to contain the virus spread.

Canada’s federal legislators on Wednesday approved a C$52 billion aid package, nearly double the value outlined last week, as well as C$55 billion in the form of tax deferrals.

Ontario, home to manufacturers and Canada’s major financial center, sees no economic growth in 2020 after an estimated 1.6% expansion in 2019, while unemployment is projected to rise to 6.6% from 5.6%.

“I’d say that 2020 growth will probably be even weaker than they’ve assumed, but can’t fault them since the economic backdrop is changing so quickly,” said Robert Kavcic, a senior economist at BMO Capital Markets.

He calculates that the province has “a pretty big cushion” built into the numbers of about C$5 billion.

With economic activity constrained, revenue is forecast to dip slightly to C$156.3 billion in the coming fiscal year, while program expenses are seen rising to C$161.1 billion from C$153.1 billion in 2019-20.

Net debt is seen rising to C$379.2 billion in 2020-21 from an estimated C$355.2 billion in the current fiscal year, which would raise net-debt-to-GDP to 41.7%.

Long-term public borrowing is seen rising to C$43.6 billion after the province pre-borrowed C$4.1 billion. It was estimated at C$36 billion in the current fiscal year.

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UPDATE 3-SoftBank criticises Moody's after 2-notch downgrade

* Moody’s says considering further downgrade

* SoftBank says move “will cause substantial misunderstanding”

* Has requested Moody’s withdraw its ratings

* Said this week will sell assets to fund share buyback

* Shares have rallied 55% since buyback announcement (Adds recent S&P view on SoftBank)

By Sam Nussey

March 25 (Reuters) – SoftBank Group Corp on Wednesday hit out at credit ratings agency Moody’s after it downgraded the tech conglomerate by two notches to Ba3 and took the unusual step of asking for the ratings to be withdrawn.

Moody’s said here it was reviewing SoftBank for a further downgrade as the tech conglomerate moves to sell down core parts of its portfolio to offset the weak performance of its tech bets.

That decision is based on “excessively pessimistic assumptions” and “will cause substantial misunderstanding among investors” and “result in significant confusion for issuers”, SoftBank said in a statement.

“We decided to request Moody’s to withdraw its corporate and foreign currency bond ratings.”

SoftBank said this week it would raise as much as $41 billion through asset sales to fund its biggest ever stock buyback, after investors sold shares due to concern over high leverage and souring bets on unproven startups via the $100 billion Vision Fund.

SoftBank’s shares have rallied 55% since the buyback announcement, which will see the group retire almost half its shares. But its ability to engineer the sale of part of a portfolio that includes Chinese ecommerce group Alibaba is under scrutiny as the coronavirus outbreak rattles markets.

“Asset sales will be challenging in the current financial market downturn, with valuations falling and a flight to quality,” Moody’s analyst Motoki Yanase said.

SoftBank has declined to identify the assets that will be sold down or monetized, with likely candidates including stakes in Alibaba and domestic wireless carrier SoftBank Corp. It plans to make the transactions over the next four quarters

Last week S&P Global Ratings revised its outlook for SoftBank to negative but stopped short of a ratings downgrade.

After the asset sale announcement, S&P said Softbank “has the potential to ease the downward pressure on its credit quality.”

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REFILE-UK has bought 3.5 million coronavirus antibody tests – health minister

(Fixes typo in headline of March 24 story)

LONDON, March 24 (Reuters) – British health minister Matt Hancock said on Tuesday the government had bought 3.5 million antibody coronavirus tests so that people who suspect they have had the virus would be able to check for sure.

“We’ve now bought 3.5 million antibody tests that will allow people to see whether they have had the virus and are immune to it and then can get back to work,” Hancock said at a news conference.

“We expect people not to be able to catch it, except in very exceptional circumstances, for a second time.”

National Medical Director of NHS England, Stephen Powis, also said Britain had recruited its first person into a clinical drug trial. (Reporting by Elizabeth Howcroft, Writing by Kylie MacLellan; editing by William James)

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UPDATE 1-Trump, Pence held call with investors on economy – admin. official

(Adds detail from source)

WASHINGTON, March 24 (Reuters) – U.S. President Donald Trump and Vice President Mike Pence held a conference call on Tuesday with Wall Street investors to discuss the U.S. economy, the Federal Reserve and other issues, an administration official said.

The list of senior executives included, but was not limited to, Dan Loeb of Third Point, Stephen Schwarzman of Blackstone Group, Robert Smith of Vista Equity, Jeff Sprecher of ICE/NYSE, Paul Tudor Jones of JUST Capital and Citadel Chief Executive Ken Griffin.

Pence led the call, according to a source familiar with the matter, adding that Vista’s Smith told Trump and Pence that small businesses did not have enough liquidity to survive the crisis without help, and that they needed more government support.

Trump and Pence have met with a wide range of business executives in recent weeks as the administration looks for ways to slow the spread of the coronavirus and halt the rapid economic downturn. (Reporting by Steve Holland and Greg Roumeliotis; Editing by Sandra Maler and Richard Chang)

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GLOBAL MARKETS-Stocks, gold bounce on new stimulus from Fed, others

* Stocks jump in biggest single-day bounce in month

* Investors relieved as Fed pledge eases bond stress

* Factory surveys show extent of economic damage

By Herbert Lash, Sujata Rao and Marc Jones

NEW YORK/LONDON, March 24 (Reuters) – Financial markets rebounded sharply on Tuesday, with a measure of global equities headed for its biggest bounce since the crisis erupted a month ago, while the safe-haven dollar recoiled as investors welcomed unprecedented global stimulus efforts.

While the U.S. Federal Reserve’s offer of unlimited bond-buying was not expected to mitigate on its own the devastating impact of the coronavirus, investors hoped it would help avert a global depression with the help of other rescue packages.

The Fed’s action had failed to persuade Wall Street on Monday, with losses of 2%-3% on major indexes. But the mood improved on Tuesday as other governments and central banks stepped in and Congress readied a $2 trillion stimulus package to limit the economic fallout from the fast-spreading pandemic.

U.S. gold futures climbed as much as 6.7% to $1,672.60 an ounce as the moves by the Fed and others eased the need for cash and slashed the demand for dollars.

“The Fed’s measures are unprecedented, and they have been extremely proactive in preventing this external shock from morphing into a wider funding crisis,” said Vasileios Gkionakis, head of FX strategy at Lombard Odier.

U.S. and European stocks jumped 6% or more and the dollar index, a basket of major trading currencies, slid.

MSCI’s gauge of stocks across the globe gained 6.88%, the largest single-day gain since equities tumbled from all-time highs a month ago.

The broad pan-European STOXX 600 index rose 6.41% and emerging market stocks rose 5.97%.

The Dow Jones Industrial Average rose 1,538.36 points, or 8.27%, to 20,130.29. The S&P 500 gained 164.01 points, or 7.33%, to 2,401.41 and the Nasdaq Composite added 453.25 points, or 6.61%, to 7,313.93.

The Fed also will expand its mandate to corporate and municipal bonds and backstop a series of other measures that analysts estimate will deliver more than $4 trillion in loans to non-financial firms.

Other countries unveiled their own measures. South Korea’s ravaged market climbed 8.6% after the government doubled a planned economic rescue package to 100 trillion won ($80 billion).

In China, mainland stocks posted their biggest gain in three weeks of almost 3%, while Japan’s Nikkei soared 7%, its biggest daily gain in four years.

But investors remained wary, as the number of coronavirus infections topped 350,000 and new infections brought in from abroad rose in China.

Business activity collapsed from Australia and Japan to Western Europe at a record pace in March, as measures to contain the coronavirus hammered the world economy, and Japan said it was postponing the Olympics.

IHS Markit’s flash composite Purchasing Managers’ Index (PMI) for the euro zone, seen as a good gauge of economic health, plummeted to a record low of 31.4 in March, in the biggest one-month fall since the survey began in 1998.

With no resolution to the pandemic and not enough visibility into the depth of the economic downturn, it’s too early to call the end to the market’s rout, said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey.

“The answer is still, ‘you got to get it under control,’” Saluzzi said about the coronavirus. “Everybody keeps saying it’s going to get worse before it gets better, so the markets are going to remain choppy and volatile.”

The government and central bank financial support helped calm nerves in bond markets, where yields on two-year U.S. Treasuries hit their lowest since 2013.

The benchmark 10-year U.S. Treasury note fell 32/32 in price to yield 0.8674%.

Germany’s 10-year yield was up 2 basis points on the day at -0.36%, compared with a 4 bps rise before the purchasing managers index (PMI) releases, all small moves when compared to record lows hit at -0.90% earlier in March.

ALL ABOUT THE ECONOMY

The impact of the virus on the global economy is evident in a series of growth forecast downgrades and advance readings of PMIs across the world’s biggest economies.

German activity plunged to the lowest since the 2009 crisis, driven by a record services contraction, while French activity hit all-time lows. Japan posted its biggest-ever services fall.

However, the prospect of massive Fed funding pushed the greenback 0.26% lower against rivals, off three-year peaks , falling against the yen and sliding 1% versus the euro.

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