The yield on the benchmark 10-year U.S. Treasury fell below 0.8% for the first time and global stocks followed Wall Street lower, as investors piled into haven assets on worries about the economic impact of the coronavirus.
The pan-continental Stoxx Europe 600 dropped 2.4%. U.S. futures also fell, with securities tied to the S&P 500 declining 1.2%. On Thursday, all three major U.S. stock indexes fell more than 3%. Asia’s major benchmarks closed lower Friday, with the Shanghai Composite Index losing 1.2% and Japan’s Nikkei down 2.7%.
Ten-year Treasury yields slipped to 0.767%, the lowest intraday level on record, from 0.924% the day before. Germany’s 10-year bund yield fell to minus 0.714% from minus 0.682% Thursday. Bond yields move inversely to prices.
Haven assets gained, with the Japanese yen rising 0.4% against the dollar and gold increasing 0.6%.
“The spread of the coronavirus in developed markets such as the U.S. and Europe also challenges our earlier growth assumptions which had included the shock mainly being confined to China and activity starting to normalize from Q2 onwards,’’ Barclays analysts wrote in a morning note.
This week, governments and central banks around the world announced measures to counteract the economic impacts of the coronavirus. The Federal Reserve cut rates by 0.5 percentage point to between 1% and 1.25%, and the Bank of Canada followed suit. Italy doubled the amount of funds it will deploy to try to contain the virus to €7.5 billion ($8.4 billion).
Futures markets suggest the Fed’s key rate is likely to be in a range of just 0.25% to 0.5% by the end of April. That would be just 0.25 percentage points higher than the near-zero level that held from the depths of the global financial crisis until December 2015.
“Investors are expecting rate cuts now and they are expecting [the cuts] to persist in the next two to three years,” said Homin Lee, Asia macro strategist at Lombard Odier. He said markets were pricing two to three further interest-rate reductions this year, and that these moves would only be partially reversed in the next three years.
Investors are awaiting the release of the U.S. jobs report for February, before the coronavirus epidemic started to affect the U.S. economy, later Friday. Economists surveyed by The Wall Street Journal are expecting 175,000 jobs to have been added last month and for the unemployment rate to be at 3.5%, a 50-year low. The U.S. Commerce Department will also release data on the trade deficit, which is expected to have fallen to $46 billion in January from $48.88 billion the previous month.
Stock markets in Asia fell early Friday after a steep selloff in the U.S.
Photo: Andy Wong/Associated PressOil prices fell Friday, with the global benchmark Brent crude declining 2.1% to trade at $48.92 a barrel, despite OPEC’s preliminary agreement Thursday to cut output by 1 million barrels a day. The meeting continues Friday in Vienna, where the cartel will try to persuade Russia to also reduce its production in an attempt to put a floor on the oil price. Brent has lost at least 25% since the beginning of the year as the coronavirus has hammered demand.
Write to Anna Hirtenstein at anna.hirtenstein@wsj.com and Chong Koh Ping at chong.kohping@wsj.com
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https://www.wsj.com/articles/treasury-yields-hit-new-lows-as-virus-impact-spreads-11583461400
2020-03-06 08:56:00Z
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