"Drastic measures by the Fed and other Central Banks have failed to appease markets," NAB FX strategist Rodrigo Catril said in a morning note.

"The message from markets is that as much as monetary stimulus is a welcome move, lowering the price of borrowing and increasing liquidity are not enough. The required COVID-19 measures are hampering the global economy and with activity grinding to a halt, governments need to step in and provide support. Markets are crying out for more fiscal backing."

The VIX leapt 43% to 82.69.

In terms of the Dow's 30 components, Boeing paced losses with a 23.9% drop; the company's stock has now lost 60% of its value so far this calendar year.

Tesla fell 18.6% to $US445.07; it peaked at $US968.99 a month ago.

Perhaps one bright spot for the US economy, Amazon said it plans to hire 100,000 warehouse and delivery workers to keep up with demand because of the virus outbreak.

The yield on the US 10-year note tumbled 24 basis points to 0.72%. The spot dollar index slipped 0.7%.

Scotiabank sees recessions in both the US and Canada. "After no growth in Q1 in both economies, we figure the US and Canada will contract at rates of 9–10% at a seasonally adjusted and annualised rate during Q2 in what we presently deem to be worst case scenarios under high uncertainty.


"Rebounds will be elusive in both economies over Q3 with Canada very tentatively projected to contract by over 2% in Q3 and the US to contract by about ½%.

"Significant rebounds are anticipated starting in Q4 through 2021H2 as activity returns including reopened schools. The situation is obviously highly fluid with many unknowns."

Scotiabank also said it expected both the US and Canda to "experience technical recessions and full year contractions in 2020 for the first time since 2009 during the GFC.

"We caution that the magnitude of downside risk could be greater as broader industry shutdowns may occur, credit risk may intensify and if the policy responses are inadequate. The effects could also be smaller if the quarantines subside earlier than anticipated and policy support intensifies."

Today's agenda

Local: RBA board meeting minutes

Overseas data: Japan industrial output January final; EU ZEW expectations March; UK ILO unemployment rate January; US retail sales February, Industrial output February, Business inventories January, NAHB housing market index March

Market highlights


ASX futures down 209 points or 4.1% to 4839 near 7am AEDT

AUD -1.6% to 61.06 US cents

On Wall St: Dow -12.9% S &P 500 -12% Nasdaq -12.3%

In Europe: Stoxx 50 -5.3% FTSE -4% CAC -5.8% DAX -5.3%

Nikkei 225 futures -3.4%

Spot gold -2.5% to $US1491.71 an ounce at 2.31pm New York time

Brent crude -11.2% to $US30.06 a barrel

US oil -8.3% to $US29.09 a barrel

Iron ore -0.9% to $US90.88 a tonne

Dalian iron ore +0.5% to 661.5 yuan

LME aluminium -0.3% to $US1675 a tonne

LME copper -3.1% to $US5290.50 a tonne

2-year yield: US 0.36% Australia 0.50%

5-year yield: US 0.49% Australia 0.52%

10-year yield: US 0.72% Australia 0.94% Germany -0.47%

From today's Financial Review

The RBA plan to stem bond sell-off: Regulators have been forced to take unprecedented action to offset heavy foreign investor selling of government bonds and to discourage banks from shutting down loans to small business.

Why the Reserve Bank will push the QE button: Top financiers believe the Reserve Bank will pull the QE trigger in coming days in order to restore lasting calm to turbulent bond markets.

PM to fast-track billions more as crisis escalates: The federal government is preparing to roll out billions of dollars more in economic assistance as it tries to prop up the hospitality, tourism and other sectors that have been hit hardest by the coronavirus catastrophe.

United States

Pantheon Macroeconomics on the outlook for US stocks: "Earnings

forecasts are nonsense at this point, so we don't even know where valuations now stand. But the value of US quoted companies is not zero. Earnings will crater from the first quarter onwards, but should begin to recover by the end of the year."


US markets should stay open despite intense volatility, the head of the US securities regulator said, quashing industry speculation that the government might shut down the country’s exchanges to stop a plunge in stock prices.

“Markets should continue to function through times like this,” Securities and Exchange Commission chairman Jay Clayton told CNBC in a phone interview, adding that the SEC was closely monitoring markets and was working with exchanges and market infrastructure providers to ensure they could continue to function.

Speaking to Fox News on Monday, NYSE president Stacey Cunningham said closing the markets would be the “wrong response,” adding: “It’s important that investors have access to their money.”

Nasdaq CEO Adena Friedman also told CNBC it was “critically important” that markets remained open.

Europe

Boris under pressure as lockdown spreads across Europe: Anxiety is growing in Britain about the government's idiosyncratic approach to fighting the COVID-19 pandemic.


The pan-European STOXX 600 fell 4.9%, with markets in France and Spain leading losses as the two countries joined Italy in enforcing a national lockdown.

French banks Natixis and SocGen gave up 11.8% and 15.3%, respectively, dragging the wider market down 5.8% to its lowest level since June 2013.

Spain's IBEX slumped almost 8% to its lowest in nearly two decades, with financials Santander, BBVA , Caixabank SA and Banco de Sabadell SA shedding 10.6% to 13%.

Europe's banking index fell 8.4% to a record low.

Credit Suisse plummeted 9.4% to an all-time low after a report that US prosecutors were investigating the bank's role in a $US2 billion Mozambique corruption case.

UK shares plunged as airlines announced flight cuts and stepped up calls for emergency aid to get through the coronavirus outbreak.

London's blue-chip FTSE 100 index dropped 4% to its lowest since October 2011, adding to a 17% slide last week, while the broader European STOXX 600 index was down 4.9%.

A volatility gauge for eurozone stocks, commonly known as the fear gauge, jumped to an all-time high of 95.02 points.


Britain's airline stocks took the biggest hit after two of the largest airlines in Europe, British Airways and easyJet, warned of aircraft groundings on an unprecedented scale as the coronavirus pandemic took a heavy toll on operations.

ICAG, the owner of British Airways, slid 27% after saying it would cut its flying capacity by at least 75% in April and May. Shares of EasyJet and TUI AG slumped 19.3% and 12.7%, respectively

"The sector has a reputation for being heavily indebted and a poor track record for seeing through crises. We've already seen Flybe go into administration and we will no doubt see more airlines fail," Russ Mould, investment director at AJ Bell, said.

"Shareholders can wave goodbye to any dividends and airlines certainly won’t be buying back shares in the current environment."

Asia

Hong Kong stocks fell sharply on Monday as dire China data and a second emergency interest rate cut by the Federal Reserve in less than two weeks underscored just how much damage the coronavirus outbreak had already done to the global economy.

The Hang Seng index fell 4.0%, to 23,063.57, while the China Enterprises Index lost 4.4%, to 9,227.60.

Sell-off was across the board, with IT stocks leading the decline. The Hang Seng IT index tumbled 6.8%, with index heavyweight ZTE crashing 23.2% after reports of new US bribery probe.


The Hong Kong Monetary Authority lowered its base rate charged through the overnight discount window to 0.86%.

Mainland investors were not deterred as they continued to hunt for bargains, purchasing 7.5 billion yuan ($US1.07 billion)worth of Hong Kong shares via the Stock Connect for the day.

"We like Hong Kong, China more than other parts of the world. We have been reducing US and raising China for quite some time, repositioning in the past few weeks," said Alex Wong, director at Ample Finance Group.

Currencies

It’s been a rough time for the Australian, New Zealand and Canadian dollars and the outlook isn’t any better, according to ING FX strategist Francesco Pesole said.

ING sees a “decisive move below” 60 US cents for the Aussie, with 58 US cents a near-term target.

A potential delay in Reserve Bank of New Zealand action could bolster the Kiwi against its peers for now, Mr Pesole said.

As a result, ING thinks “AUD/NZD parity – albeit for a brief period - is now a solid option, while we expect a move to 0.57 in NZD/USD later in Q2”.


Commodities

Copper prices slid to the lowest since November 2016 on worries that lockdowns in Europe and the United States to tackle the coronavirus would further erode metals demand.

Three-month copper on the London Metal Exchange (LME) fell 3.1% to $US5290.50 a tonne in final open-outcry trading.

"Despite the very, very negative numbers for China over the weekend in terms of industrial production and fixed asset investment, I would still say that the general view is that China should recover from here," analyst Carsten Menke at Julius Baer in Zurich said.

Industrial output in China, the world's biggest copper user, contracted at the sharpest pace in 30 years in the first two months of the year, data showed on Monday.

A China-based metals analyst said: "Diving data in February is what everybody has anticipated, but my worry is March. People think things are going back to normal after utilisation rates recover, but they ignore the permanent loss of the supply chain."

Three-month copper on the London Metal Exchange (LME) fell 3.1% to $US5290.50 a tonne in final open-outcry trading, the weakest since November 2016.

Copper, often used as a gauge of global economic health, has shed 17% since touching an eight-month high of $US6343 in mid-January.


The biggest risk was that China would suffer a second wave of infection after restrictions were lifted, Menke said. "That's something we don't know and that's the big, big wild card."

Worries of an aluminium surplus were fuelled by data showing China's production of the metal rose by 2.4% to 5.85 million tonnes in January-February from a year earlier.

The net speculative short position of aluminium on the LME has grown to a year-to-date high of 30% of open interest, close to last year's peak of 32%, broker Marex Spectron said in a note.

LME aluminium dipped 0.3% to close at $US1675 a tonne.

Australian sharemarket

The S &P/ASX 200 Index plummeted 537.3 points, or 9.7 per cent, to 5002 on Monday, the local market's heaviest loss since the Black Monday crash in 1987.

Monday's fall firmly cemented the benchmark index in bear market territory, with the market down 30.2 per cent from its peak on February 20.


Macquarie warns banks' dividends to plunge on COVID-19: Macquarie is tipping the big four banks' dividends to fall between 7 per cent and 25 per cent out to financial 2021.

ASIC tells traders to cut order volumes: ASIC has told large trading firms to cut orders by as much as 25 per cent after a surge in trades threatened to overwhelm exchanges.

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