Asian stocks gain after U.S. Fed promises economic support

BEIJING  — Asian stock markets gained Tuesday after the U.S. Federal Reserve promised support to the struggling economy as Congress delayed action on a $2 trillion coronavirus aid package.

A currency trader walks by a screen showing the Korea Composite Stock Price Index (KOSPI) at the foreign exchange dealing room in Seoul, South Korea, Tuesday, March 24, 2020. Asian stock markets gained Tuesday after the U.S. Federal Reserve promised support to the struggling economy as Congress delayed action on a $2 trillion coronavirus aid package. (AP Photo/Lee Jin-man)

Market benchmarks in Tokyo and South Korea rose nearly 7% while Shanghai, Hong Kong and Australian markets also gained.
Traders were encouraged by the Fed’s promise to buy as many Treasurys and other assets as needed to keep financial markets functioning.

That came as Wall Street fell 3% after Congress failed to approve an economic support package. It would send checks to U.S. households and offer support for small businesses and the hard-hit travel industry, but Democrats say it favors companies too heavily at the expense of workers and public health.

“Asian investors like what they see from an all-in Fed which is being viewed in a very impressive light for both Main and Wall Street even as the U.S. congress dithers,” said Stephen Innes of AxiCorp. in a report.

The Nikkei 225 in Tokyo rose 6.7% to 18,009.50 and Seoul’s Kospi gained 6.9% to 1,585.46. The Shanghai Composite Index rose 1.7% to 2,706.80.

The Hang Seng in Hong Kong was 3.8% higher at 22,513.69 and Australia’s S&P-ASX 200 gained 2.9% to 4,677.70.

The Fed’s promise goes beyond the $700 billion in purchases announced last week.

The central bank said it will buy a wide range of investments, including corporate bonds for the first time, to improve trading in markets that help home buyers purchase houses, state and local governments borrow and businesses to get enough short-term cash to make payroll.

“The pressure is now on Congress to get its act together and provide the support that the Fed cannot do — helping the vulnerable people who face the biggest health and economic consequences,” said James Knightley of ING in a report.

“The risk is that this wall of support from the Fed and the positive reaction in markets may give Congress a sense that it has more time and the pressure to deliver a package is reduced,” Knightley said.

As Congress was locked in stalemate, the number of known infections worldwide jumped past 380,000. After just a few weeks, the United States has more than 46,000 cases and more than 600 deaths.

For most people, the coronavirus causes only mild or moderate symptoms, such as fever and cough. Those with mild illness recover in about two weeks. Severe illness including pneumonia can occur, especially in the elderly and people with existing health problems. Recovery could take six weeks in such cases.

Also Monday, trading on the New York Stock Exchange went all-electronic for the first time after the trading floor was temporarily closed as a precaution. The exchange announced the move last week after two employees tested positive for the virus. The number of floor traders had dwindled sharply in recent years as more trading become electronic.

Wall Street and some other stock markets have lost nearly one-third of their value over the past month as business shutdowns spread and airlines, retailers and other industries suffer rising losses.

Economists increasingly say a recession seems inevitable. Analysts are slashing their forecasts for upcoming corporate profits. Forecasters say they cannot project how deep the downturn might be or how long it will last.

Professional traders say investors need to see a decline in numbers of new infections before markets can find a bottom.

Congress debated through the weekend on the rescue plan, but White House officials and congressional leaders are struggling to finalize it. Democrats blocked a vote to advance the package Monday. They want to steer more of the assistance to public health and workers.

Even if the two sides find a compromise, Congress may need to go through more rounds of similar negotiations if the outbreak isn’t brought under control.

On Wall Street, the benchmark S&P 500 index 2.9% to 2,237.40 in another day of sudden swings. It was down as much as 4.9% and as little as 0.2% earlier in the day.

The Dow Jones Industrial Average fell 3% to 18,591.93. The Nasdaq, which is dominated by technology companies, lost only 0.3% to 6,860.67 as tech shares held up better than the rest of the market.

In energy markets, benchmark U.S. crude gained 73 cents to $23.36 per barrel in electronic trading on the New York Mercantile Exchange. The contract lost $2.59 the previous session to close at $22.63. Brent crude, used to price international oils, added 5 cents to $27.03 per barrel in London. It lost $1.49 the previous session to $26.98.

The dollar declined to 110.33 yen from Monday’s 111.23. The euro gained to $1.0795 from $1.0721.

GSG