(Bloomberg) — Stocks fell in Europe and Asia along with U.S. equity futures as investors took in worsening American coronavirus figures and assessed the impact of the pandemic on corporate profits and dividends. The dollar climbed with Treasuries.
Banks led the decline in the Stoxx Europe 600 Index after lenders including HSBC Holdings Plc and Standard Chartered Plc halted dividends and share buybacks. Futures on the S&P 500 Index slid as much as 3.6% after President Donald Trump warned of a “painful” two weeks ahead, with the country grappling to get the outbreak under control and New York City’s death toll now topping 1,000. The euro declined as manufacturing data from the single-currency region showed a contraction.
Stocks in Japan hit session lows in the final hour of trading, closing down almost 4%. Hong Kong shares also dropped. Chinese equities outperformed as a private reading on the country’s manufacturing sector beat expectations, rebounding in March.
Stocks are beginning the new quarter with more declines, hot on the heels of the worst quarter for global shares since 2008. Investors disappointed with the loss of dividend income could spark a fresh wave of selling, knowing that analysts are dashing to update earnings forecasts to take into account the looming global recession and the slump in stock prices.
“Markets are looking at global equities in a new light, one with no buyback support and no dividends,” said Chris Weston, head of research at Pepperstone Financial Pty Ltd. The earnings season is likely to trigger a decline in consensus S&P 500 profit expectations which “are far too high relative to dividend futures,” he said.
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The coronavirus is set to throw the world into recession, and economists are becoming less convinced about the potential for a strong snapback in growth. Manufacturing PMI readings across the euro zone painted a bleak picture of economic activity, with Italy’s posting a record drop. China’s reading, however, surged back into growth territory in March, offering a ray of hope that the world’s second-biggest economy may be on its way to recovery.
“In the U.S., the data remains fairly worrying and the peak may well be a few weeks on,” Bob Parker, an investment committee member at Quilvest Wealth Management, told Bloomberg TV. “The economic data is clearly starting to improve in March in China after a very weak January and February.”
In its latest measure to combat the economic fallout from the pandemic, the Federal Reserve said Tuesday it was establishing a temporary repurchase agreement facility to allow foreign central banks to swap any Treasury securities they hold for cash. That’s yet another step beyond the actions it took in the 2008 financial crisis.
Elsewhere, West Texas oil dipped back to about $20 a barrel as President Donald Trump’s pledge to meet with feuding producers Saudi Arabia and Russia to support the market failed to bolster prices.
These are the main moves in markets:
Stocks
Futures on the S&P 500 Index dipped 3.1% as of 10:18 a.m. London time.The Stoxx Europe 600 Index decreased 3.1%.The MSCI Asia Pacific Index fell 2.1%.
Currencies
The Bloomberg Dollar Spot Index increased 0.8%.The euro decreased 0.9% to $1.0927.The British pound declined 0.5% to $1.2353.The Japanese yen weakened 0.1% to 107.63 per dollar.
Bonds
The yield on 10-year Treasuries dipped five basis points to 0.62%.Germany’s 10-year yield fell three basis points to -0.5%.Britain’s 10-year yield decreased four basis points to 0.316%.
Commodities
Gold increased 1% to $1,593 an ounce.West Texas Intermediate crude fell 1.6% to $20.15 a barrel.
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