US stock futures rose and most Asian markets steadied on Tuesday a day after fears over the spread of the coronavirus prompted the biggest sell-off in global equities in two years.
In morning trading in Asia, futures trading pointed to gains of about 1 per cent when Wall Street opens later in the day. That came after the S&P 500 dropped 3.4 per cent overnight, erasing its gains for the year due to signs the spread of the virus, known as Covid-19 was accelerating outside of China in countries including Italy and South Korea and Iran.
The prices of brent crude, the international oil marker, recovered 0.5 per cent to $56.59 a barrel after falling on Monday. The yield on 10-year US Treasuries rose 3 basis points to 1.399 per cent, while gold — another haven asset — slipped 0.3 per cent to $1,655.41 per ounce as traders cautiously embraced riskier assets.
South Korea’s Kospi stock index edged up 0.7 per cent while the Australian dollar, which serves as a proxy for traders’ views on the Chinese economy, added 0.2 per cent against the greenback to $0.6617.
The exceptions in the region on Tuesday were Japan and mainland China. The Topix was down 2.7 per cent in Tokyo as traders returned from a three-day weekend, while the CSI 300 of Shanghai- and Shenzhen-listed shares slid 1 per cent.
Strategists said some of the gains for equities were driven by rising expectations of interest rate cuts by the US Federal Reserve and the belief that Monday’s sell-off was overdone.
“At the end of yesterday the markets began to price in a further chance of the Fed cutting interest rates his year,” said Mansoor Mohi-uddin, senior macro strategist at NatWest Markets.
The Japanese yen and South Korean won remained under pressure due to concerns over the economic impact of outbreaks in those countries, he added.
China’s renminbi was finding some support from a slowdown in reported cases in the country. The onshore traded Chinese currency gained 0.3 per cent to 7.0097 per US dollar.
“You’ll always find someone to buy the dip,” said Andrew Sullivan, Hong Kong-based director at brokerage Pearl Bridge Partners. “Having had such a huge sell-off, there will certainly be a number of Asian investors saying this is an opportunity to buy.”
However, Paras Anand, chief investment officer for Asia Pacific at Fidelity, cautioned against buying the dips: “Whilst we feel that this could represent a buying opportunity, especially in Asia and emerging markets, investors would do well to recognise that this recent weakness may have a way to run.”
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February 25, 2020 at 10:09AM
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Asian stocks and US futures rise after brutal sell-off - Financial Times
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