Most Asia markets rise as virus fears offset by bank support hope

by AFP/ pic by AFP

HONG KONG – Most Asian markets rose Monday as bargain-buyers moved in following last week’s global rout and central banks including the Federal Reserve flagged support measures such as interest rate cuts.

But after equities suffered their worst week since the financial crisis more than a decade ago, investors continue to fret over the economic fallout from the new coronavirus as the worldwide death toll rises.

And analysts warned of further turmoil on trading floors as governments struggle to contain the disease, which has now killed more than 3,000 people and infected almost 90,000.

“Markets face significant uncertainty in the short term and remain at high risk of more downside given the unknowns around COVID-19,” Shane Oliver, a global investment strategist at AMP Capital Investors, said.

Traders remain worried the disease “will disrupt economic activity more deeply and for longer than had been expected a week or so ago”.

Shanghai led gainers, rising 3.2 percent after dropping more than five percent last week, while Hong Kong was up 0.6 percent after a loss of around four percent.

The gains came on hopes for government stimulus after an index of Chinese manufacturing activity fell to its lowest level on record in February as factories around the country were shuttered.

Tokyo was up one percent, while Seoul added 0.8 percent, Mumbai climbed 1.6 percent and Singapore put on 0.3 percent. Manila also rose.

Manila also rose but Sydney fell 0.8 percent after Australia recorded its first death from the virus, while Wellington gave up 1.4 percent. There were also losses in Taipei and Bangkok. Jakarta reversed early losses to sit more than one percent lower after Indonesia reported its first COVID-19 case.

Bets on Fed rate cut

AxiCorp analyst Stephen Innes warned that fear was playing a major role in driving markets.

“With the headline bombardment through social media outlets, any sense of rational thinking appears to have gone missing,” he said in a note.

“Near-term, the markets will be driven by how far the fear of the coronavirus spreads, probably not how the data plays out.”

He added that “since global growth has rested on consumer spending over the last year, if consumers are afraid (whether rational or not), the markets will collapse”.

Investors are betting on a Fed rate cut at its March 17-18 policy meeting after governor Jerome Powell made a rare unscheduled statement on the outbreak, which he said “poses evolving risks to economic activity”.

He said the central bank was “closely monitoring developments and their implications for the economic outlook”, adding: “We will use our tools and act as appropriate to support the economy.”

Markets are betting on as many as two interest rate cuts this year, while there is growing speculation the Australian central bank will soon lower borrowing costs, while the Bank of Japan said it stood ready to provide necessary support.

Bets on US rate cuts weighed on the dollar, which retreated against higher-yielding, riskier units including the South Korean won, Australian dollar and South African rand.

However, it bounced against the safe-haven yen after the BoJ statement.

The pound was in focus as European and British officials prepared to kick off trade talks after Britain’s exit from the EU earlier this year. But observers are worried as each side has accused the other of shifting away from goals set out in a political declaration agreed in 2019.

Monday’s bounce in major markets also saw a rally in oil prices, which suffered a pummelling last week.

Both main contracts rose more than three percent, with traders also cheering comments from Russian President Vladimir Putin, who said he would be willing to co-operate with OPEC in cutting output to support the beleaguered market.

However, the commodity remains under pressure, with Brent and WTI having lost around a quarter of their value since the start of the year with investors spooked by falling demand in key consumer China.

The sharp drop in crude prices dented Gulf markets Sunday, with the Saudi bourse, the region’s largest and one of the world’s top ten, shed 3.7 percent.

Key figures around 0710 GMT

  • Tokyo – Nikkei 225: UP 1.0 percent at 21,344.08 (close)
  • Hong Kong – Hang Seng: UP 0.6 percent at 26,296.27
  • Shanghai – Composite: UP 3.2 percent at 2,970.93 (close)
  • Dollar/yen: UP at 108.26 from 108.06 at 2230 GMT on Friday
  • Euro/dollar: UP at $1.1043 from $1.1029
  • Pound/dollar: UP at $1.2837 from $1.2821
  • Euro/pound: UP at 86.03 pence from 86.00 pence
  • Brent Crude: UP 3.1 percent at $51.23 per barrel (new contract)
  • West Texas Intermediate: UP 2.8 percent at $46.00 per barrel
  • New York – Dow: DOWN 1.4 percent at 25,409.36 (close)
  • London – FTSE 100: DOWN 3.2 percent at 6,580.61 (close)