Asian stocks hold steady on China stimulus measures
Shares in China and Hong Kong rise amid fears the coronavirus will continue to spread
Tokyo — Asian stocks steadied on Wednesday as Chinese stocks nudged higher on hopes of additional stimulus to lessen the economic effect of a coronavirus outbreak, but risks remain as the illness continues to spread and the death toll neared 500.
MSCI’s broadest index of Asia-Pacific shares outside Japan was up 0.36%.
Shares in China rose 0.5% while stocks in Hong Kong climbed 0.42% in early trading.
The onshore yuan was little changed vs the dollar, highlighting the cautious mood as investors monitor the effect of the virus.
The safe-haven yen and Swiss franc nursed losses vs the dollar. Oil prices bounced in Asia on hopes for more output cuts from Opec and its allies but sentiment remained weak on worries about a long-term dent in demand for energy and other commodities.
China and other countries have imposed travel restrictions to try to contain a new virus that emerged in the central Chinese city of Wuhan late in 2019, slamming the breaks on manufacturing and tourism in the world’s second-largest economy.
Many investors argue that any slowdown will be temporary and that Chinese policy steps are reason to remain optimistic about the growth outlook, but so far public health officials have not found a way to stop the spread of the virus both inside and outside China.
“We’re going to have a strong day in Asia, but whether this is the reversal of a downtrend remains to be seen,” said Michael McCarthy, chief market strategist at CMC Markets in Sydney.
“Oil investors remain pessimistic about demand disruptions, but equity investors, especially overseas, are discounting the impact of the virus.”
Australian shares were up 0.37%, buoyed by gains in the mining sector. Japan’s Nikkei stock index rose 0.99%, supported by shares of industrial equipment makers.
US stock futures fell 0.23% in Asia on Wednesday. The S&P 500 rose 1.5% on Tuesday and the tech-heavy Nasdaq rose to a record high.
The People’s Bank of China (PBOC) is likely to lower its key lending rate — the loan prime rate — on February 20, and cut banks’ reserve requirement ratios in the coming weeks, policy sources told Reuters.
The PBOC has already pumped hundreds of billions of dollars into the financial system this week. This helped Chinese stocks stabilise on Tuesday after a rout that wiped out about $700bn in market capitalisation on Monday when Chinese markets opened after an extended holiday.
The virus has already claimed nearly 500 lives. Japan’s health minister said on Wednesday 10 people on a cruise ship at the port of Yokohama have tested positive for the new virus.
In the onshore market, the yuan held steady at 6.9970/$ after rising 0.3% on Tuesday.
The yen traded at 109.48/$, close to the lowest in almost a week. The Swiss franc held steady at 0.9696/$ after a 0.3% decline on Tuesday.
Benchmark 10-year Treasury yields edged up to 1.6026% in a sign of receding concern about the coronavirus.
US crude ticked up 1.27% to $50.24 a barrel, and Brent crude rose to 0.74% to $54.63 per barrel in recovery from declines on Tuesday.
Opec and its allies are considering cutting oil output by a further 500,000 barrels per day (bpd) due to the effect on oil demand from the coronavirus, sources tell Reuters.
Brent futures have lost about 16% since China confirmed on January 21 that human-to-human infection of the previously unknown virus is possible, which kicked of a rout in global markets as the number of cases and the death toll rose.