Asia stocks rise on bets of more coronavirus stimulus as dollar rally fades

TOKYO -- Asian stocks rose on Friday as investors wagered policymakers will roll out additional stimulus measures to combat the coronavirus pandemic after US unemployment filings surged to a record.

MSCI's broadest index of Asia-Pacific shares outside Japan rose 1 percent. Australian shares were up 2.02 percent, while Japan's Nikkei stock index rose 3.65 percent.

E-Mini futures for the S&P 500 rose 0.81 percent in Asia following 3 consecutive days of gains in the S&P 500 on Wall Street.

The dollar nursed losses against major currencies as central banks' steps to solve a dollar shortage in funding markets started to gain traction.

The US House of Representatives is expected to pass a $2 trillion stimulus package later on Friday that will flood the world's largest economy with money to stem the damage caused by the pandemic.

The US Federal Reserve has already slashed rates to zero and launched quantitative easing. The Fed will also take the unprecedented step of offering a direct backstop for corporate loans.

The United States is now the country with the most coronavirus cases, surpassing even China, where the flu-like illness first emerged late last year. Policymakers may need to offer more stimulus as the virus slams the brakes on economic activity and increases healthcare spending.

"I'm not sure what measures are left, but the reaction in stocks shows some people hoping for more stimulus thought the market was a little oversold," said Yukio Ishizuki, FX strategist at Daiwa Securities in Tokyo.

"Currencies tell a different story. The dollar is the lead actor. The mad rush to buy dollars due to liquidity concerns is starting to fade."

The number of Americans filing claims for unemployment benefits surged to a record of more than 3 million last week as strict measures to contain the coronavirus pandemic ground the country to a sudden halt, data showed on Thursday.

The jobless blowout was announced shortly after Federal Reserve Chairman Jerome Powell said that the United States "may well be in recession," an unusual acknowledgement by a Fed chair that the economy may be contracting even before data confirms it.

Global equity markets took the data in their stride, partly because most central banks have already aggressively eased policy and governments are backing this up with big fiscal spending.

Leaders of the Group of 20 major economies pledged on Thursday to inject over $5 trillion into the global economy to limit job and income losses from the coronavirus and "do whatever it takes to overcome the pandemic."

In the currency market, the greenback fell 0.25 percent to 109.34 yen in Asia on Friday, on pace for a 1.3 percent weekly decline.

The dollar was also headed for weekly declines against the Swiss franc, the pound, and the euro .

The US currency's fall after two weeks of gains suggests that the Fed's efforts to relieve a crunch in the dollar funding market are working, some analysts said.

The yield on benchmark 10-year Treasury notes rose slightly in Asia to 0.8383 percent, while the two-year yield edged up to 0.2946 percent.

Yields were still headed for a weekly decline, taking cues from the Fed's extraordinary steps to bolster markets and the $2 trillion stimulus package.

US crude ticked up 1.77 percent to $23 a barrel in Asia. Energy markets have been caught in a tug-of-war between hopes for stimulus spending and worries about excess supplies of crude.

Gold, normally bought as a safe haven, was slightly lower. Spot gold fell 0.30 percent to $1,626.58 per ounce.

Gold market participants remained concerned about a supply squeeze following a sharp divergence between prices in London and in New York. The coronavirus has grounded planes normally used to transport gold and closed precious metals refineries

source: news.abs-cbn.com

S&P raises Philippine credit rating to a notch below investment-grade

After weeks of talking up the country's stellar first-quarter economic performance, the Aquino government got what it wished for: a credit rating upgrade from one of three major international debt watchers.

In a statement, Standard & Poor's Ratings Services on Wednesday said it lifted the Philippines' long-term foreign currency rating to 'BB+' from 'BB.' The agency also affirmed its 'BB+' long-term local currency rating on the Philippines. Both ratings were assigned a stable outlook.

S&P's action lifts the country's credit score to a notch below investment-grade, putting it at par with the score affirmed last week by another major agency, Fitch Ratings.

This leaves Moody's Investors Service as the only other key rater that has yet to raise its score on the Philippines to the same level.

A higher rating allows the Philippines to borrow abroad at a cheaper rate, thus enabling the government to set aside more money for addressing infrastructure bottlenecks and helping the poor.

"The foreign currency rating upgrade reflects our assessment of gradually easing fiscal vulnerability, as the government's fiscal consolidation improves its debt profile and lowers its interest burden," said Agost Benard, S&P credit analyst.

"A high, albeit declining, interest burden constitutes an additional rating constraint. The interest burden of 13 percent of general government revenues is high, largely because revenues remain low relative to the size of the economy," Benard said, citing the need to widen the tax base and improve compliance.

"Notably, the government's foreign-currency debt stands at a relatively high 42 percent of total, rendering debt service costs and fiscal outturns susceptible to adverse exchange rate movements," he added.

Data the Bureau of Treasury released on Wednesday showed that debt servicing last May rose nearly eight percent from a year ago, but the year-to-date figure had fallen by 12.4 percent.

The Philippines' key debt ratios have been on a downtrend, hitting decade lows in 2011. In the first quarter of this year, the country's external debt ratio - foreign debt as a percentage of the country's gross domestic product - eased to 27.4 percent from a year ago's 29.5 percent. This ratio is a measure of solvency, and so indicates the Philippines' capacity to pay down debt in the long run.

The country's external debt service ratio likewise fell to eight percent this year from 8.2 percent in 2011, and is way below the 20 to 25 percent international benchmark. This ratio measures the sufficiency of foreign exchange to meet maturing debt.

The Philippines has enjoyed ample foreign exchange inflows so far this year, causing the peso to hit a four-year high on Tuesday. Part of that liquidity helped fuel a stock market rally that saw the Philippine Stock Exchange index hitting a new record close of 5,365.7 also on Tuesday.

Despite the global uncertainty caused by the euro zone debt crisis and the slowdown in the US and China, the Bangko Sentral ng Pilipinas still expects the country to register a $2.7 billion balance of payment surplus this year.

Current account surplus forecast at 2% of GDP

"The rating action also reflects the country's strengthening external position, with remittances and an expanding service export sector continuing to drive current account surpluses," Benard said.

"We project ongoing current account surpluses of about two percent of GDP, based on remittance inflows from a large and well-diversified expatriate labor force, and a fast-expanding business process outsourcing industry," he added.

Communications Secretary Ramon Carandang said the upgrade to BB+ "is an affirmation of the fiscal management of the Aquino administration."

"At a time when countries around the world are debating austerity versus stimulus, we have had the fiscal space to provide stimulus without weakening our fiscal position. The President and the economic team have worked hard to win ratings upgrades and we're now another step closer to investment grade status," he said.

Separately, Finance Secretary Cesar V. Purisima said the Philippines "can now clearly make our case for an investment grade status."

"This is the eight positive credit ratings action under the Aquino administration and this only gives us more confidence to continue with the work that we have started towards macroeconomic stability, fiscal sustainability and inclusive economic growth," he added.

On Tuesday, the Cabinet economic cluster, meeting with President Benigno Aquino III, forecast GDP growth in the second quarter exceeding the better-than-expected 6.4 percent in the first quarter. The Philippines' first-quarter growth was Asia's second fastest after China.

Budget Secretary Florencio Abad said he already cleared for disbursement 91 percent of the infrastructure outlay falling under the Department of Public Works and Highways, laying the ground for more government spending in the coming months.

source: interaksyon.com