Stocks dive as rescue bids by Fed, peers fail to calm panicky markets

SYDNEY/HONG KONG: Stock markets were routed and the dollar stumbled on Monday after the Federal Reserve slashed interest rates in an emergency move and its major peers offered cheap U.S. dollars to ease a ruinous logjam in global lending markets.

Japanese Prime Minister Shinzo Abe said G7 leaders would hold a teleconference at 1400 GMT to discuss the crisis. "By any historical standard, the scale and scope of these actions was extraordinary," said Nathan Sheets, chief economist at PGIM Fixed Income, who helps manage US$1.3 trillion in assets."This is dramatic action and truly does represent a bazooka."

"The performance of the economy and the markets will be mainly determined by the severity and duration of the virus' outbreak." Such is the dislocation the Fed cut interest rates by 100 basis points on Sunday to a target range of 0per cent to 0.25per cent, and promised to expand its balance sheet by at least US$700 billion in coming weeks.

"It may be a shot in the arm for risk assets and help to address liquidity concerns...however, it also raises the question of whether the Fed has anything left in the tank should the spread of the virus not be contained," said Kerry Craig, global market Strategist at J.P. Morgan Asset Management.The Fed's rate cut combined with the promise of more bond buying pushed U.S. 10-year Treasury yields down sharply to 0.68per cent, from 0.95per cent late on Friday.

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