TOKYO (Reuters) – Japan will resume fiscal reform once the economy overcomes the hit from the coronavirus pandemic, Prime Minister Shinzo Abe said, brushing aside calls by some lawmakers to keep spending permanently with money printed by the central bank.

The government has pledged to spend a combined $2.2 trillion in two stimulus packages to cushion the economic blow from the pandemic, while the central bank has pledged to buy unlimited amounts of bonds to cap borrowing costs at zero.

“Japan’s economy is battling a crisis, so the priority now is to use all available means to put it on a recovery path,” Abe told parliament on Monday, when asked how Japan would reconcile the huge spending with the need to fix its tattered finances.

“By achieving economic growth, Japan can restore fiscal health. But that doesn’t mean Japan can endlessly increase debt,” he said, adding the government will resume efforts to improve the country’s fiscal health once the economy stabilises.

Abe’s remarks come amid calls from some lawmakers for Japan to prop up the economy via unlimited money-printing to finance government spending – a concept dubbed “Modern Monetary Theory” (MMT) that has been floated by some U.S. academics.

Japan’s economy slipped into recession and is seen suffering an annualised contraction of over 20% in April-June, as lockdown measures to contain the pandemic hit consumption and businesses.

Analysts say Japan’s huge public debt – already the biggest among major industrialised nations – constrains its ability to ramp up fiscal spending to spur growth.

S&P Global Ratings last week lowered its outlook on Japan’s sovereign debt rating to stable from positive, citing increased uncertainty over the country’s fiscal health as it boosts spending to combat the health crisis.

GOLD PRICE TALKING POINTS

The price of gold trades near the monthly high ($1746) as Federal Reserve Chairman Jerome Powellprepares to testify in front of Congress, and the dovish forward guidance may keep the precious metal afloat as the central bank pledges to “increase our holdings of Treasury and agency mortgage-backed securities over coming months at least at the current pace.”

GOLD PRICE HOLDS NEAR JUNE HIGH AHEAD OF FED CHAIRMAN POWELL TESTIMONY

The price of gold has traded to fresh yearly highs during every single month so far in 2020, and the precious metal may continue to exhibit a bullish behavior in June as the pullback from the yearly high ($1765) reverses ahead of the May low ($1670).

However, bullion appears to be stuck in a narrow range following the reaction to the Federal Open Market Committee (FOMC) interest rate decision, and it remains to be seen if Chairman Powell will reveal anything new in front of US lawmakers as Fed officials pledge to “evaluate our monetary policy stance and communications as more information about the trajectory of the economy becomes available.”

Chairman Powell may strike a less dovish tone as the update to the Summary of Economic Projections (SEP) show “a general expectation of an economic recovery beginning in the second half of this year,” and it seems as though the FOMC is in no rush to deploy more non-standard measures after expanding the scope of the Main Street Lending Program “to allow more small and medium-sized businesses to be able to receive support.”

In turn, Chairman Powell may tame speculation for a yield-curve control program as “whether such an approach would usefully complement our main tools remains an open question,” and the central bank head may emphasize that “when the time comes, after the crisis has passed, we will put these emergency tools back in the toolbox” as the balance sheet climbs above $7.1 trillion in June.

Looking ahead, the FOMC may alter the forward guidance at the next interest rate decision on July 29 as “some indicators suggest a stabilization or even a modest rebound in some segments of the economy,” but the low interest rate environment along with the ballooning central bank balance sheetsmay continue to act as a backstop for the price of goldas marketparticipants look for an alternative to fiat-currencies.

With that said, the semi-annual Fed testimony may generate a similar reaction to the FOMC interest rate decision, and the price for bullion may continue to exhibit a bullish behavior in June as the pullback from the yearly high ($1765) fails to produce a break of the May low ($1670).

Investing.com – European stock markets are set to open sharply lower Monday, as a jump in reported Covid-19 cases in Asia over the weekend prompted fears of a second wave of infections and the potential economic damage this could cause.

At 2 AM ET (0600 GMT), the DAX futures contract in Germany traded 3% lower. France’s CAC 40 futures were down 3.3%, while the FTSE 100 futures contract in the U.K. fell 2.1%.

China reported a new outbreak in Beijing’s Xinfadi wholesale food market over the weekend, prompting its closure as well as the locking down of nearby housing districts.

In Japan, Tokyo also reported Sunday its highest number of new cases in around a month, with the majority of cases traced back to recently re-opened nightclubs and bars. 

This all followed a spike in cases in the United States, where more than 25,000 new cases were reported on Saturday.

“Any new outbreak will be looked at very, very cautiously by investors. The market is putting into perspective that the COVID-19 issue has not been resolved yet. It’s a reality check,” said James McGlew, analyst at stockbroker Argonaut, reported by Reuters.

Stock markets had benefited from a strong rally since late March, fueled by central bank and fiscal stimulus and optimism as countries gradually lifted their lockdown policies put in place to curb the spread of the virus.

Economic data out of China earlier Monday did little to improve the mood, with industrial output rising only 4.4% in May from a year ago, while analysts had forecast a gain of 5.0%, and retail sales falling a deeper-than-expected 2.8%.

Back in Europe, EU Commission President Ursula von der Leyen is set to meet with British Prime Minister Boris Johnson on Monday in a bid to revive stalled talks on post-Brexit ties. So far there hasn’t been much progress on a free-trade agreement and there’s not much time left to extend the end-2020 deadline for a deal.

In corporate news, BP (LON:BP) said it it expects to take up to $17.5 billion of charges in its second-quarter earnings to reflect what it expects will be the “enduring” effects of the pandemic, in the form of lower oil prices.

Elsewhere, easyJet (LON:EZJ) aircraft will fly Monday for the first time since March 30, as the British carrier resumes a small number of mainly domestic flights after weeks of lockdown. Movie theater operator Cineworld will also be in focus after it pulled out of its deal to buy Cineplex, a move that will ease concerns about its debt levels.

Oil prices slumped Monday, extending losses from last week, as new coronavirus infections hit China and the United States, potentially hitting the already fragile recovery in fuel demand.

The oil benchmarks fell about 8% last week, their first weekly declines since April. 

At 2 AM ET, U.S. crude futures traded 4.9% lower at $34.50 a barrel. The international benchmark Brent contract fell 3.4% to $37.40.

Elsewhere, gold futures fell 0.6% to $1,726.25/oz, while EUR/USD traded at 1.1237, down 0.2%.

SYDNEY (Reuters) – Asian shares stumbled on Monday and oil prices slipped as fears of a second wave of coronavirus infections in Beijing sent investors scurrying for safe-havens while underwhelming data from China further weighed on sentiment.

MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.3% with Australian shares off 0.1% and South Korea easing 0.3%. Japan’s Nikkei faltered 0.7%.

Chinese shares opened in the red with the blue-chip CSI300 index down 0.1%.

Monday’s losses follow a strong rally in global equities since late March, fuelled by central bank and fiscal stimulus and optimism as countries gradually lifted restrictions put in place to curb the spread of the novel coronavirus.

“Any new outbreak will be looked at very, very cautiously by investors. The market is putting into perspective that the COVID-19 issue has not been resolved yet. It’s a reality check,” said James McGlew, analyst at stockbroker Argonaut.

McGlew expects a further correction “as markets quantify what lies ahead of us.”

The lead from Wall Street was also dour with e-minis for the S&P500 sinking 1.1% in early Asian trading.

Risk sentiment took a knock after Beijing recorded dozens of new COVID-19 cases in recent days, all linked to a major wholesale food market. Authorities have closed the centre and locked down nearby housing districts.

Investors are also fretting over a spike in cases in the United States where more than 25,000 new cases were reported on Saturday.

Worldwide coronavirus cases have crossed 7.86 million with 430,501​ deaths, according to a Reuters tally.

Economic data from China did little to revive risk appetite.

China’s industrial output rose 4.4% in May from a year ago when analysts had forecast a gain of 5.0% while retail sales fell a larger-than-expected 2.8% in a sign of weak domestic demand.

The Chinese yuan extended losses in offshore trade after the data to be last at 7.0883 per dollar.

Some analysts were still hopeful of a revival in sentiment.

“We assume that any second wave is likely to be more manageable than the first given earlier policy experience,” analysts at Morgan Stanley (NYSE:MS) wrote in a note.

“Policy easing will also help Asia (excluding Japan) get back on its feet better.”

The risk-sensitive currencies of Australia and New Zealand sold off with both down 0.4% at $0.6855 and $0.6424, respectively.

Elsewhere, the safe haven Japanese yen rose on the greenback to 107.18 yen.

Analysts said further tests awaited global markets this week – in particular whether re-opening hopes could still push equities higher.

Federal Reserve Chairman Jerome Powell is also due to testify before Congress where “he may try to spin a more upbeat/hopeful outlook – but whether markets listen remains to be seen,” said Betashares chief economist David Bassanese.

Also of interest is U.S. May retail sales figures on Tuesday, which are expected to bounce smartly after a slump in April.

In commodities, oil extended losses after posting its first weekly loss since late April. Brent crude was last down 2.25% at $37.86 a barrel while U.S. crude fell 3.09% to $35.14.

Oil investors await OPEC+ committee meetings of experts later this week who will advise the producer group and its allies on output cuts. [O/R]

Gold rose 0.2% to $1,732.2 an ounce on safe haven demand.

LONDON (Reuters) – Britain’s economy shrank by a quarter in the March-April period as entire sectors were shuttered by the coronavirus lockdown, reaching what looks likely to be the bottom of a “catastrophic” crash before a long and slow recovery.

In a slump dwarfing previous downturns, the economy contracted by 20.4% in April from March, when it shrank by nearly 6%. It was 24.5% smaller than in April 2019.

Both readings were below the unprecedentedly weak forecasts in a Reuters poll of economists. The Office for National Statistics said the economy had shrunk back to its size in 2002.

“This is catastrophic, literally on a scale never seen before in history,” Paul Johnson, director of the Institute for Fiscal Studies think tank, said. “The real issue is what happens next.”

Finance minister Rishi Sunak said: “In line with many other economies around the world, coronavirus is having a severe impact on our economy.”

However, the Organisation for Economic Co-operation and Development says Britain – with its huge services industries which are hit hard by social distancing measures – could suffer the worst downturn among the countries it covers, with an 11.5% contraction this year.

Sunak said the 133 billion pounds ($168 billion) of extra spending and tax cuts he has rushed out meant Britain had “the best chance of recovering quickly as the economy reopens”.

Much of Britain’s retail sector is due to open its doors next week and the government last month urged people who could not do their jobs at home to return to work as lockdown restrictions are gradually lifted.

Bank of England Governor Andrew Bailey – who has warned of the deepest recession in three centuries this year – said on Wednesday he could see some signs of a recovery but long-term economic damage remained likely.

The BoE is expected to announce a fresh increase of at least 100 billion pounds in its bond-buying firepower next week.

Johnson of the IFS told Sky News the hit might be short, if the roughly one third of private sector employees who are temporarily laid off can return to work, consumers go out and spend again and Britain avoids a second COVID-19 wave.

But it was more likely that unemployment jumps as the government’s wage subsidy scheme ends in October, pushing many workers over an income cliff, and Britain limps into 2021 with the risk of a Brexit shock also on the horizon, he said.

Britain formally left the European Union at the end of January but little has yet changed in its relationship with the bloc during a transition period which lasts for the rest of the year. Talks on a comprehensive future relationship deal have hardly progressed since February.

The ONS said output in the dominant services sector fell by 19.0% in April from March while manufacturing was down more than 24% and construction crashed by nearly half.

In the three months to April, the overall economy contracted by 10.4% from the previous three-month period.

TOKYO (Reuters) – Oil prices slid early on Friday, extending heavy overnight losses on a surge in U.S. coronavirus cases this week that has raised the prospect of a second wave of the outbreak slamming demand in the world’s biggest consumer of crude and fuel.

West Texas Intermediate (CLc1) was down $1.32, or nearly 4%, at $35.02 a barrel by 0011 GMT, after slumping more than 8% on Thursday. Brent crude (LCOc1) was down $1.15, or 3%, at $37.40 a barrel, having dropped nearly 8% the previous session.

A rally off April’s lows has come to a shuddering halt this week as the market faced the reality that the coronavirus pandemic may be far from over globally, with cases in the United States alone passing 2 million this week.

The oil benchmarks are heading for their first weekly decline in seven, with Brent dropping about 12%, while U.S. crude is heading for a loss of more than 10%.

“A sustainable rally needs to include improving gasoline demand, reducing inventories, increasing product margins to the point where refiners kickstart runs,” RBC Capital Markets said, noting that “U.S. driving patterns are far from normal.”

While producers have been cutting supply, demand remains constrained by the outbreak, with gasoline stockpiles in the U.S. last week rising more than expected to 258.6 million barrels, according to government data.

U.S. crude inventories rose against forecasts by 5.7 million barrels to a record 538.1 million barrels, as cheap imports from Saudi Arabia flowed into the country.

In the meantime, states including Texas and Arizona are struggling to cope with a rising number of coronavirus patients filling hospital beds.

In Houston, Lina Hidalgo, the senior official for the county that includes the city that is the heart of the U.S. oil industry, warned “we may be approaching the precipice of a disaster”.

More than 7.43 million people have been infected by the novel coronavirus around the world and more than 400,000 have died, according to a Reuters tally.

TOKYO (Reuters) – The safe-haven Swiss franc and the yen held on to gains on Friday while the U.S. dollar also held firm against riskier currencies after global stock prices tumbled on renewed doubts over the prospects of a quick recovery in the global economy.

Doubts over the economy stemmed in part from the U.S. Federal Reserve’s dire economic assessment as well as fears over new coronavirus infections, though some analysts said a stock market correction was inevitable after a rally.

The Swiss franc rose to 0.94395 per dollar , having hit a three-month high of 0.9376 on Thursday.

The franc has recovered its lost ground against the euro over the past two weeks to trade at 1.0665 to the euro (EURCHF=).

The yen also rose to 106.79 yen per dollar . It hit a one-month high of 106.58 on Thursday, having gained 3.1% from a 2-1/2-month low hit just a week ago.

Following its two-day meeting, the Fed signalled on Wednesday it plans years of extraordinary support for the U.S. economy, which policymakers project will shrink by 6.5% in 2020, with the unemployment rate at 9.3%.

Although that appears to have triggered selling in shares, analysts have said Fed officials have been cautious all along, especially compared to the bullish mood in financial markets until earlier this year.

“It is almost mudslinging to blame the stock falls on the Fed’s dour assessment. Most market players have acknowledged that the stock rally has been driven by excess liquidity and the Fed’s accommodative stance is unlikely to push stocks lower,” said Makoto Noji, chief currency strategist at SMBC Nikko Securities.

“In short, it was a correction from an overbought market, which should not last long. But what we should be careful is that the market’s fall could continue if we have more bad news from China and Europe for instance.”

The tensions between the United States and China have shown limited signs of abating while Europe is facing tough negotiations next week on its recovery fund plan.

Investors were also worried about new coronavirus infections as the world gradually reopened following shutdowns aimed at curbing the spread of the disease.

In the United States, new infections are rising slightly after five weeks of declines, according to a Reuters analysis.

Part of the increase is due to more testing, which hit a record high on June 5 of 545,690 tests in a single day but has since fallen.

The dollar held firmer against risk sensitive currencies.

The euro stood at $1.1299 (EUR=), off Wednesday’s three-month high of $1.14225.

Similarly, the British pound slipped to $1.2582 from Wednesday’s high of $1.2812.

The Australian dollar tumbled to $0.6838 , having fallen 2% in the previous session, the biggest daily fall since the market turmoil of March.

The Mexican peso lost 3.8% and dipped further in Asia to 22.85 to the dollar .

NEW YORK (Reuters) – Asian equities are set to fall sharply on Friday after Wall Street stocks and oil tumbled over growing concerns that a resurgence of coronavirus infections could stunt the pace of reopening economies.

The three major U.S. stock indexes fell more than 5%, posting their worst day since mid-March, when markets were sent into freefall by the abrupt economic lockdowns put in place to contain the pandemic.

“All of a sudden the coronavirus, which has been an also-ran story for some days now, became more important as the virus began picking up in some states, and the market began thinking there may be delays to reopening,” said Tim Ghriskey, chief investment strategist at Inverness Counsel in New York.

Australian S&P/ASX 200 futures were down 3.04% at 20:59 GMT, while Japan’s Nikkei 225 index closed down 2.82% at 22,472.91​​​​ on Thursday. Hong Kong’s Hang Seng index futures were down 2.06%.

Cases of the disease have jumped in several U.S. states in recent days, raising concern among experts who say authorities have loosened restrictions put in place to contain the spread too early.

Cases in New Mexico, Utah and Arizona rose by 40% for the week ended Sunday, a Reuters tally shows. Florida and Arkansas are other hot spots.

The U.S. Federal Reserve released a gloomy economic outlook at the end of its two-day monetary policy meeting on Wednesday. Chair Jerome Powell warned of a “long road” to recovery.

Economic data appeared to back up the Fed’s projections, with jobless claims still more than double their peak during the Great Recession and continuing claims at an astoundingly high 20.9 million.

On Wall Street, the Dow Jones Industrial Average dropped 6.9%, the S&P 500 lost 5.89%, while the Nasdaq Composite shed 5.27%.

Oil prices tumbled on renewed concerns about demand, as new cases of the coronavirus disease rise globally, and a large buildup of U.S. crude inventories. [O/R]

Benchmark Brent crude futures settled 7.62% lower at $38.55 a barrel in U.S. trading hours, before sliding further in Asia on Friday. U.S. crude oil futures settled at $36.34 a barrel, down $3.26, or 8.23%.

U.S. Treasury and euro zone government bonds rallied after the Fed on Wednesday signaled it plans years of extraordinary support to counter the economic fallout from the pandemic.

Yields on 10-year Treasury notes dropped sharply from last week’s peak of 0.96%. [US/]

The 10-year Treasury note fell 8.6 basis points to yield 0.6625%, while Germany’s 10-year benchmark fell 10 basis points to a nine-day low of -0.43%.

Gold futures settled more than 1% higher and the dollar, yen and Swiss franc all benefited from safe-haven flows.

The yen rose to a one-month high against the dollar, while the Swiss franc climbed to a three-month peak. The dollar also rose 0.4% to 96.556 against a basket of currencies.

The euro fell 0.63% to $1.1297, and the yen slid 0.22% to $106.8500.

U.S. gold futures settled up 1.1% at $1,739.80 an ounce.

NEW YORK (Reuters) – Stronger appetite for riskier assets is set to lift Asian equities on Thursday, as government stimulus expectations support investor confidence in an economic recovery from the coronavirus.

E-mini futures for the S&P 500 were up 0.05% and Australian S&P/ASX 200 futures rose 1.23% in early trading. Japan’s Nikkei futures rose 1.1%.

The safe-have U.S. dollar continued to fall.

Markets for risk assets have been on a tear, carrying major stock market indexes to within sight of pre-pandemic, all-time highs.

MSCI (NYSE:MSCI)’s gauge of stocks across the globe moved up for the seventh consecutive trading day on Wednesday with a gain of 1.68%.

The rise came as the Nasdaq Composite, S&P 500 and the Dow Jones Industrial Average continued their rise from March cornonavirus-lockdown-lows to come within 2%, 8% and 11%, respectively, of overtaking all-time closing highs registered in February.

The dollar index fell 0.24% against a basket of other currencies early on Thursday, having hit an 11-week low on Wednesday. The euro rose as high as $1.1251, a level not seen since March 12.

“Liquidity provision by central banks – and expectations that more is coming – is helping to support the recent drive in risk markets,” ANZ Research senior economist Liz Kendall and strategist David Croy, said in a note early on Thursday.

But the analysts cautioned asset prices would need a recovery in the global economy to sustain gains.

On Wednesday, the Dow rose 2.05%, the S&P 500 gained 1.36% and the Nasdaq Composite added 0.78%.

The pan-European STOXX 600 closed at its highest since March 6. European markets have performed strongly so far this week as several countries eased strict lockdown measures.

The move to riskier assets continued to take down prices for U.S. Treasuries. The yield on the benchmark 10-year reached 0.7333% on Wednesday, up from 0.667% on Tuesday.

A closely watched part of the U.S. Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes, reached 55 basis points on Wednesday, the steepest level since mid-March. A steepening curve often points to a stronger economy.

Governments around the world have gradually started to lift tough lockdown measures imposed to contain the coronavirus which has infected nearly 6.4 million people and killed over 379,000.

Markets await Friday’s U.S. Labor Department May jobs report, which is expected to show unemployment soaring to a post-World War Two high of nearly 20% from 14.7% in April.

On Wednesday, a report showed that U.S. private payrolls fell less than expected in May, suggesting layoffs were abating as businesses reopen.

Investors are also focused on whether the European Central Bank will increase the size of its 750 billion euro ($669 billion) Pandemic Emergency Purchase Programme, when it meets on Thursday.

Oil prices rose again on Wednesday, briefly trading above $40 a barrel, the highest since March, and reflecting increased demand.

Brent crude futures for August settled up 22 cents, or 0.6%, at $39.79 a barrel. The session high of $40.53 was the highest since March 6. West Texas Intermediate (WTI) crude for July rose 48 cents, to $37.29 a barrel.

Spot gold added 0.1% to $1,698.39 an ounce early on Thursday after losing 1.6 % on Wednesday.

NEW YORK (Reuters) – Asian stocks were poised to follow the global rally on Wednesday as hopes of more government stimulus bolstered riskier assets and overshadowed a host of other worries from the coronavirus to Hong Kong and growing U.S. civil unrest.

E-mini futures for the S&P 500 were up 0.3% and {{178|Japan’s NiNikkei 225 futureswere 1.6% higher in Asia on Wednesday morning, while Australian S&P/ASX 200 futures rose 0.58% in early trading.

That comes after stocks in the United States, Europe and emerging markets hit their highest levels on Tuesday since early March and as bidding for riskier currencies pushed the dollar toward three-month lows and oil neared three-week highs.

From its March 23 low, MSCI (NYSE:MSCI)’s gauge of stocks across the globe was up 35%. Despite lockdowns to control the COVID-19 pandemic, the global index is down year-to-date only about 8%.

U.S. stocks indexes rose about 1% even as the worst civil unrest in decades left dozens of cities under curfews following protests over the death of an unarmed black man in police custody.

With its gains, the U.S. tech-heavy Nasdaq Composite is down less than 3% from its pre-pandemic record highs.

“The good times continue to roll in risk markets,” Mazen Issa, senior FX strategist at TD Securities, said in a report. “As intense as the rally has been, this is likely set to continue as the breadth of the equity rally has now spread outside the U.S.”

The U.S. Treasury yield curve steepened, reflecting the sale of more government debt to finance massive stimulus efforts. The gap between yields on 5- and 30-year Treasuries reached 116 basis points on Tuesday, its highest since early 2017.

“A steepening curve does give equities a bit of a kick,” said Kim Rupert, senior economist for Action Economics.

Expectations for additional support from the European Central Bank and the German government boosted European stocks and the euro on Tuesday.

Volkswagen (DE:VOWG_p), Daimler (OTC:DDAIF) and BMW, for example, gained more than 5% on confidence that Germany’s proposed 5 billion euro ($5.6 billion) stimulus package will boost car sales.

The ECB is expected to ramp up stimulative bond purchases when it meets on Thursday.

Oil prices climbed more than 3%, or $1 a barrel, on Tuesday on renewed U.S. demand for gasoline and hopes that major crude producers will agree this week to extend output cuts. U.S. West Texas Intermediate crude (WTI) settled at $36.81 and Brent crude settled at $39.57 a barrel.

Gold retreated 1% on Tuesday amid the broader optimism.

U.S. gold futures settled down 0.9% at $1,734.

Gold is still up more than 18% from a low of $1,450.98 in March because of the economic damage from the pandemic and the massive amounts of money coming from central banks.