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Fed launches limitless QE against economic reality
Published on: 2020-03-24
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STOCK 02A currency dealer works in front of electronic boards showing the Korea Composite Stock Price Index (KOSPI) and the exchange rate between the U.S. dollar and South Korean won, in Seoul

Asian stocks rallied on Tuesday as the U.S. Federal Reserve's sweeping pledge to spend whatever it took to stabilise the financial system eased debt market pressures, even if it could not offset the immediate economic hit of the coronavirus.
 

While Wall Street seemed unimpressed, investors in Asia were encouraged enough to lift E-Mini futures for the S&P 500 by 1.9% and Japan's Nikkei by 4.9%.
 

MSCI's broadest index of Asia-Pacific shares outside Japan added 1.2%, though that followed a drop of almost 6% on Monday. South Korea and Australia also recouped a little of their recent losses.
 

In its latest drastic step, the Fed offered to buy unlimited amounts of assets to steady markets and expanded its mandate to corporate and muni bonds.

In the hastily assembled press briefing Fed Chairman Jerome Powell said the viruss disruption to lives and businesses means second quarter growth is expected to be weakIn the hastily assembled press briefing, Fed Chairman Jerome Powell said the virus’s disruption to lives and businesses means second-quarter growth is expected to be weak.

The numbers were certainly large, with analysts estimating the package could make $4 trillion or more in loans to non-financial firms.
 

"This open-ended and massively stepped-up programme of QE is a very clear signal that the Fed will do all that is needed to maintain the integrity and liquidity of the Treasury market, key asset-backed markets and other core markets," said David de Garis, a director of economics at NAB.
 

The Fed's package helped calm nerves in bond markets where yields on two-year Treasuries hit their lowest sine 2013, while 10-year yields dropped back sharply to 0.77%.

stock 04Yet analysts fear it will do little to offset the near-term economic damage done by mass lockdowns and layoffs.
 

Speculation is mounting data due on Thursday will show U.S. jobless claims rose an eye-watering 1 million last week, with forecasts ranging as high as 4 million.

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