U.S. Equities rebounded from the biggest rout since 1987 as the U.S. government stepped up its efforts to offset the financial damage caused by the Coronavirus. Treasuries tumbled. The S&P 500 closed up almost 6% after trading in the red earlier, continuing a streak of volatility last seen during the Great Depression. The Dow Jones Industrial Average notched a 5.2% gain. Treasuries eased, erasing all of the nearly 25 basis point drop in yields on Monday. The Trump administration moved to send checks to Americans as soon as in two weeks to stave off the financial effects of an unprecedented upheaval in social interactions that looks set to plunge the world into recession. It also asked Congress for hundreds of billions in aid. The Federal Reserve reintroduced additional crisis-era tools to stabilize financial markets. The policy responses came after stresses appeared in the short-term funding and front-edit credit markets. The three-month dollar Libor rate jumped the most since 2008, and similar maturity cross currency basis swaps for Euro-Dollar, a proxy for how expensive it is to get the US Dollar, traded at the widest since 2011. Data showed U.S. Retail Sales fell in February, indicating the main driver of the economy, Consumer Spending, had begun to slow even before outbreak containment measures began. Companies began to scramble for cash, with Kraft Heinz, Caesars and MGM drawing down credit lines. Overnight markets again reversed. U.S. and European stock futures slumped and the Yen advanced, retracing some of the previous day’s moves as traders continue to test where fundamental valuations lie amid rapidly changing news flow. Rallies fizzled throughout Asia, with Japanese shares ending barely up after rising over 4% at one point. Sydney stocks plunged more than 6%, while shares in Hong Kong fell nearly 2%. S&P 500 futures once again fell by their limit after the index gained 6% on Tuesday. Australian and Japanese bond yields were higher, while Treasuries stabilized after tumbling Tuesday. As the Trump administration moves toward a big fiscal package and the federal government shifts to working from home, Treasury Secretary Steven Mnuchin warned the Coronavirus could send U.S. Unemployment up to 20% without government intervention. Oil resumed declines to trade near the lowest since 2003 and copper dropped below $5,000 a ton.
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