(Adds close of U.S. markets)
* Dollar gains as Fed moves to bolster tight credit markets
* Gold jumps on efforts to add liquidity to markets
* Oil slips as demand weakens due to coronavirus
* World FX rates in 2020 http://tmsnrt.rs/2egbfVh
* Asian stock markets: https://tmsnrt.rs/2zpUAr4
* Tracking the coronavirus: https://tmsnrt.rs/3aIRuz7
By Herbert Lash
NEW YORK, March 17 (Reuters) - Gold, the dollar and global
equity markets rose on Tuesday after the Federal Reserve said it
would buy short-term corporate debt directly from companies to
help relieve credit markets under strain from the economic
impact of the coronavirus epidemic.
The renewal of the financial crisis-era Commercial Paper
Funding Facility, first used in 2008, will provide a backstop to
that market, a key funding source for a range of U.S. businesses
that have seen liquidity dry up. The Fed said the Treasury would provide $10 billion of
credit protection to the central bank's commercial paper
operation.
Gold snapped a five-session decline on the funding effort
and stocks on Wall Street rose further as the move eased growing
fears of a liquidity crunch due to the coronavirus epidemic,
which is smothering world economic activity as businesses shut
and countries close borders.
"For commercial paper to seize up, that is an ominous sign
of bad things to come," said Chad Morganlander, senior portfolio
manager at Washington Crossing Advisors in Florham Park, New
Jersey.
"This certainly helps the plumbing of the financial system,"
he said.
Equity markets in Europe rebounded and Wall Street climbed
on a series of announcements from the Fed, the U.S. Treasury
Department and the White House.
The pan-European STOXX 600 index .STOXX rose 2.26% and
MSCI's gauge of stocks across the globe .MIWD00000PUS gained
3.50%.
On Wall Street, the Dow Jones Industrial Average .DJI rose
1,048.86 points, or 5.2%, to 21,237.38, the S&P 500 .SPX
gained 143.06 points, or 6.00%, to 2,529.19 and the Nasdaq
Composite .IXIC added 430.19 points, or 6.23%, to 7,334.78.
The move to add liquidity to credit markets came as major
central banks and commercial counterparts joined forces to
alleviate broad shortages of dollar financing in global markets.
The Bank of Japan conducted an 84-day dollar funding
operation valued at $30.272 billion, its biggest injection of
dollar funds since 2008, and South Korea also pledged to act
soon. While the funding backstop is important, it does not assist
low-wage workers who are laid off due to the closure of
restaurants, bars and other entertainment outlets, noted David
Kelly, chief global strategist at JPMorgan Asset Management.
"The question is, are authorities doing all that they can to
soften the blow of the social distancing recession? I don't
think we're there yet," Kelly said.
A fiscal spending package is needed as "there's going to be
a lot of human misery out there," he added.
The administration of U.S. President Donald Trump pursued an
$850 billion stimulus package to buttress the economy,
according to a government official who spoke on condition of
anonymity. The package would include $50 billion for airlines hard hit
by the pandemic and $250 billion for small business loans.
Trump also said his administration is considering a plan to send
Americans $1,000 checks within two weeks.
Before U.S. markets opened, equity and oil prices struggled
to shake off coronavirus fears after Wall Street's worst rout
since the Black Monday crash of 1987.
The Philippines became the first country to close its
markets, and then said trading would resume, while France,
Italy, Spain and Belgium curbed stock trading by banning
short-selling to shield some of Europe's biggest companies from
a sell-off. The moves will temporarily halt bets on falling shares at
scores of companies, from the world's largest brewer,
Anheuser-Busch InBev ABI.BR , to Spanish bank Santander
SAN.MC and Air France-KLM AIRF.PA .
The dollar surged as companies and investors sought the most
liquid currency and concerns about the coronavirus' economic
impact dented risk appetite.
The three-month euro/dollar cross-currency basis swap spread
EURCBS3M=ICAP rose as high as 120 basis points from less than
90 on Monday, putting the spread as its widest since late 2011 -
the height of the euro zone debt crisis. "Stress here is helping lift the USD," said Shaun Osborne,
chief FX strategist at Scotiabank in Toronto.
An early rebound in European markets was wiped out as the
region's battered airline and travel stocks suffered a drubbing
prior to the Fed's announcement. .EU .SXTP
Data showed German investor morale at lows last seen in the
2008 financial crisis, and rating agency S&P Global warned the
inevitable global recession this year would lead to a spike in
defaults. Brent crude fell below $30 a barrel to its lowest since 2016
as the pandemic hit oil demand while Saudi Arabia and Russia
kept up their battle for market share.
Brent LCOc1 futures slid $1.32 to settle at $28.73 a
barrel and West Texas Intermediate crude CLc1 futures fell
$1.75 to settle at $26.95 a barrel. The U.S. benchmark has
slumped more than 50% since Jan. 2.
U.S. gold futures GCcv1 settled up 2.6% at $1,525.80 an
ounce.
The dollar index =USD rose 1.442%, with the euro EUR=
down 1.61% to $1.1001.
The yen weakened 1.70% against the dollar to 107.71.
Earlier in the trading day, markets stabilized in Asia.
Australian shares .AXJO closed 5.9% higher, their biggest
daily percentage gain since October 2008, after plunging nearly
10% on Monday.
MSCI's broadest index of Asia-Pacific shares .MIAPJ0000PUS
and Japan's Nikkei .N225 both finished steady.
Some $2.7 trillion in market value was wiped from the S&P
500 on Monday as it suffered its third-largest daily percentage
decline on record. Over the past 18 days, the benchmark index
has lost $8.3 trillion. Stocks around the world .MIWD00000PUS
have hemorrhaged over $15 trillion.
Group of Seven finance ministers were to hold a call on
Tuesday night, though markets want to see fiscal stimulus and
signs that the virus will not snowball out of control.
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