* Hopes of government and central bank support lift global
shares
* ECB says it is ready to take targeted measures
* G7 says it will use all available tools
* Australia central bank cuts policy interest rate
* Oil prices recover by 2%
* Graphic: World FX rates in 2020 http://tmsnrt.rs/2egbfVh
By Marc Jones
LONDON, March 3 (Reuters) - A sharp rebound in world stock
markets lost only a little steam on Tuesday despite a lack of
any immediately gratifying measures after global policymakers
pledged to address the economic fallout from the coronavirus
outbreak.
Europe's main bourses were still more than 2% higher
0#.INDEXE but it was no longer the 3% that had them heading
for their strongest day since 2016 and investors shuffling out
of safer, lower-yielding assets. .EU .MIWD00000PUS .N
Wall Street's main S&P 500 and Dow Jones markets were flat
in early trade, having jumped by 4% and 5% respectively on
Monday for their biggest daily gains since 2009.
Finance ministers from the G7 and central bank governors
said in a statement that they would use "all appropriate policy
tools" to safeguard against the economic risks posed by the
fast-spreading coronavirus. "We reaffirmed our commitment to adopt all appropriate
policy steps," Japanese Finance Minister Taro Aso told reporters
after a G7 conference call. "And that we stand ready to
cooperate further on timely and effective measures."
The mild sell-off in super-safe government bonds came after
yields on benchmark U.S. Treasuries hit record lows in recent
days as worries mounted about a potential global recession.
The decision to hold a G7 call came after the head of the
European Central Bank, Christine Lagarde, on Monday joined the
chorus of heavyweight central bank chiefs signalling a readiness
to deal with the threat from the outbreak. Earlier messages from the U.S. Federal Reserve that it was
prepared to act continued to weigh on the dollar, having fuelled
expectations of a sizable rate cut at its meeting in two weeks.
The dollar, meanwhile, lost 0.4% against the yen, weakening
to 107.9 yen JPY= and slipping towards the five-month low of
107 set on Monday.
Lagarde's comments weakened the euro a touch at $1.1115
EUR= , having hit an eight-week peak of $1.1185 in the previous
session. Until that point other top ECB policymakers had said
the bank was still assessing the situation.
The Australian dollar AUD=D3 , viewed as a proxy bet on
China because of the raw materials it sells there, sat above a
recent 11-year trough, largely on short covering after its
central bank cut interest rates earlier in the day. Oil prices gained a further 2% after a jump of more than 4%
on Monday. U.S. West Texas Intermediate crude futures CLc1
went to $48 a barrel while Brent crude LCOc1 stood at $52.90.
O/R
MSCI's world stocks index was up 0.5% having scored its best
day since 2011 on Monday when Wall Street's roar higher pushed
it up by a little more than 3%. .MIWD00000PUS .
"Barring any further deterioration of the coronavirus
outbreak, we believe that the global cyclical recovery is likely
to gain further momentum," Schroders' Asian multi-asset team
said in a report as markets there .MIAPJ0000PUS posted a
second straight session of rises.
MONEY MARKETS
Japan's Nikkei .N225 had closed 1.2% down, however, after
short-covering ran its course and the yen firmed on the dollar,
though South Korea's Kospi .KS11 rose 0.6%.
Australian shares .AXJO ended 0.7% up after the central
bank cut interest rates to a record low of 0.5% - the fourth
drop in less than a year. "It is reasonable to expect a response that reflects a
combination of fiscal measures and central bank initiatives,"
Bank of England Governor Mark Carney said on Tuesday.
Money markets are fully pricing in a cut of at least 0.25
percentage points to the current 1.5-1.75% target rate at the
Fed's March 17-18 meeting, as well as a 0.1 percentage point cut
to the ECB's minus 0.5% key rate at its March 12 meeting.
The frantic moves by policymakers reflected growing fears
about the disruption to supply chains, factory output and global
travel caused by the new epidemic just as the world economy was
trying to recover from the effects of the U.S.-China trade war.
The coronavirus, which has already claimed more than 3,000
lives, now appears to be spreading much more rapidly outside
China than within the country. That leads the world into
uncharted territory, though the World Health Organization has so
far stopped short of calling it a pandemic. U.S. bond yields rolled back some of their sharp falls.
The 10-year U.S. Treasuries yield moved to 1.14% US10YT=RR
from a record low of 1.03% on Monday. The two-year notes' yield
US2YT=RR jumped back to 0.87% from a 3 1/2-year low of 0.71%,
though yields on the most rate-sensitive short-term notes
continued to drop. US3MT=RR
April Fed funds rate futures FFJ0 still price in about an
80% chance of a 0.5 percentage point cut this month and total
cuts of almost a full percentage point by the end of year.
There was also the so-called Super Tuesday factor in play.
Fourteen states and one U.S. territory are hosting primary
elections in a flurry that could bring more clarity over which
Democratic presidential contender voters would prefer to
challenge Republican President Donald Trump in November.
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