Futures tied to the Dow Jones Industrial Average rose as much as 4.5% in early morning trading Friday. U.S. stocks plunged Thursday, with the Dow falling 10% as the rapidly spreading coronavirus drove fears of a global slowdown despite action from the Federal Reserve.
The pan-continental Stoxx Europe 600 rose 2.3% at the open Friday. Italy’s financial regulator suspended short selling of 85 Italian companies until the end of the trading day. The U.K.’s regulator also banned the trading activity on the same companies dual-listed on British exchanges.
Oil prices rose, with global benchmark Brent crude climbing 4% to trade at $34.55. Some investors sold off liquid assets. The benchmark 10-year U.S. Treasury yield rose to 0.964% from 0.842% on Thursday. The Japanese yen declined 1.3% and gold lost 0.4%.
In Asia, most major indexes closed down after a volatile day that prompted some exchanges to impose short trading halts. Japan’s Nikkei declined 6.1%. Australia’s ASX 200 index closed up 4.4% after its central bank provided A$8.8 billion to its banks in short-term borrowing known as the repo market. India’s Sensex index rose 4.8% after the Reserve Bank of India also said that it would inject cash into markets.
These policy moves followed packages announced by the Federal Reserve and the European Central Bank to try to support the economies from the coronavirus fallout and a recent crash in oil prices. The Fed said it would provide $1.5 trillion to banks in the repo market. The ECB announced a series of measures that included a temporary expansion to its bond-buying program and loans for banks at interest rates as low as minus 0.75%.
Today is about “central bank credibility’’ and could mark the “beginnings of a stabilization process,” said Philip Saunders, co-head of multiasset at Investec Asset Management. Asset prices were marked down heavily after Thursday’s selloff, likely prompting some investors to buy.
While central banks had moved quickly to cut interest rates and make sure funding was available for banks and companies, that wasn’t enough, according to Tai Hui, chief market strategist for Asia at J.P. Morgan Asset Management.
“Governments will need to accelerate their fiscal support…to limit the negative impact on businesses and low-income families” and investors are now pricing in a U.S. recession, Mr. Hui said.
Markets are likely to stay volatile and global infection rates for the novel coronavirus have shown no signs of peaking, said Eli Lee, head of investment strategy at the Bank of Singapore.
“The rout started from valuations at fairly rich levels, and deep value has not sufficiently emerged for bargain hunters to show up in force,” he said, noting that global stocks had been comparatively expensive before the recent selloff began, which may explain its severity.
The MSCI All Country World index, which covers stocks in more than 70 developed and emerging markets, had fallen more than 16% Monday through Thursday, FactSet data showed. That puts it on track for its worst weekly performance since the global financial crisis in 2008.
Some Asia-Pacific currencies fell sharply against the U.S. dollar, with the Korean won dropping to a four-year low and the New Zealand dollar hitting its weakest level in a decade.
Later Friday, the University of Michigan in the U.S. will put out a report on March consumer sentiment, which will provide insight into the impact of the coronavirus outbreak on the public. The Bank of England will also release minutes from its latest meeting, when it enacted an emergency rate cut.