Major oil producers will talk today about a possible solution to their production dispute. Photo: AFP

(ATF) – Investor sentiment was broadly upbeat across Asia ahead of the meeting of major oil-producing countries, following positive takeaways from the Federal Reserve’s meeting minutes published overnight.

Still, the spread of the coronavirus hangs heavy over investor minds with the infection count of the global pandemic crossing the 1.5 million mark.

Korea’s Kospi benchmark is 0.9% higher, Hong Kong’s Hang Seng index added 0.88%, Australia’s S&P ASX 200 leapt 2.05% but Japan’s Nikkei 225 is down 0.47%, following the outperformance on Wednesday. Regionally, MSCI Asia Pacific ex-Japan benchmark is 0.52% higher.

Federal Reserve’s minutes from two emergency meetings in March which showed the central bank was “prepared to use its full range of tools to support the flow of credit to households and businesses and thereby promote its maximum-employment and price-stability goals.”

“We expect the FOMC will do what is necessary to maintain accommodative financial conditions for the balance of this year. This includes the purchase of US Treasuries in the amounts needed to prevent any meaningful backup in yields from the coming Treasury issuance,” Bob Miller, BlackRock’s head of Americas’ Fundamental Fixed Income, said.

HK relief measures

The Hong Kong Monetary Authority (HKMA) announced on Thursday a plan to suitably reduce the issuance size of Exchange Fund Bills in order to increase the overall Hong Kong dollar liquidity in the interbank market. This follows the overnight HK$137.5 billion package of relief measures announced by the Hong Kong government.

The Bank of Korea left its main policy rate unchanged at 0.75% on Thursday as expected. But in a post-decision statement it said it would conduct monetary policy in an accommodative manner in order to mitigate downside risks to the economy and ease volatility in financial markets”.

The support from central banks to ensure availability of cash to businesses and households is reflected in credit markets outperformance with more investment grade issuance likely to emerge in coming days. 

Credit markets have opened on a solid note with sovereign CDS tighter by 4-15bps. The Asia IG Series 33 index moved in by 7 basis points at 128/131.

“Stresses in the USD rates space are easing, providing a calmer backdrop to global markets still reeling from the Covid-19 hit. Most of this can be attributed by aggressive Fed actions (swap lines and repo facilities) that have ensured that USD funding stresses have largely dissipated,” DBS Bank analysts said in a note.

“Risk appetite appears to be gradually returning as stresses ease. Meanwhile, talks of another US$1 trillion in US fiscal stimulus (on top of US$2 tn, which has already been announced) suggest that issuance pressure will be immense in the coming months.”

Brent futures added 2.3% and WTI crude rose 5.4% ahead of the OPEC plus meeting of oil producing nations later in the day which is expected to discuss output cuts to boost prices.

The collapse in oil prices has battered energy stocks whose market capitalization dominates many benchmarks. Oil producers like Shell have already announced significant cuts in their capital expenditure and share buyback plans. ExxonMobil said capital investments will fall to about $23 billion from a previously announced $33 billion.

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