Global markets take another beating as more countries shut up shop

“First is that this involves masses of people. In the GFC, that was an event that occurred in the investment banks around the world, it didn’t involve people on the street. The second is that social media is helping to drive this fear and panic.”

In Asian trade, MSCI’s broadest index of Asia-Pacific shares outside Japan lost 5.4%, with New Zealand’s market shedding a record 10% at one point as the government closed all non-essential businesses.

Shanghai blue chips dropped 3.3%, though Japan’s Nikkei rose 2.0% aided by the expectation of more aggressive asset buying by the Bank of Japan. In Australia, the S&P/ASX200 dropped 5.62% to take the index to a seven-year low.

Globally, analysts are dreading data on weekly US jobless claims due on Thursday amid forecasts they could balloon by 750,000, and possibly by more than 1-million.

US stocks have fallen more than 30% from their mid-February peak and even the safest areas of the bond market are experiencing liquidity stress as distressed funds are forced to sell good assets to cover positions gone bad.

In contrast to the response by authorities to the global health crisis, however, are calls from some on Wall Street to ease restrictions as soon as possible to give the economy room to recover.

“Extreme measures to flatten the virus ‘curve’ is sensible-for a time-to stretch out the strain on health infrastructure,” former Goldman Sachs CEO Lloyd Blankfein tweeted.

“But crushing the economy, jobs and morale is also a health issue, and beyond. Within a very few weeks let those with a lower risk to the disease return to work.”

Mounting economic toll

The mounting economic toll led to a major rally in sovereign bonds late last week, with efforts by central banks to restore liquidity in the market allowing for more two-way trade.

Yields on the benchmark US 10-year note were down at 0.80%, having dived all the way to 0.84% on Friday from a top of 1.28%. European benchmarks like German bunds were at about -0.36% down more than 20 basis points from last week’s 10-month highs.

Calls were continuing for the eurozone’s 19 governments to issue the bloc’s first joint bonds to try to get the region through the economic crush of the virus lockdowns.

In New Zealand, the central bank announced its first outright purchase of government paper aiming to inject much-needed liquidity into the local market.