Asia shares fragile amid China worries, oil sinks
A fragile calm gripped Asian shares on Tuesday as investors waited anxiously to see if Beijing could stem the rout in Chinese assets, while oil hit 13-month lows as the coronavirus throttled demand in the world’s biggest importer of fuel.
Brent crude LCOc1 futures crashed to $54.11 a barrel, bringing losses for the year so far to 18%, while U.S. crude CLc1 sank to $49.99.
China’s central bank has flooded the economy with cash while trimming some key lending rates, but analysts suspect more will have to be done to offset the economic fallout from the virus.
The total number of virus deaths in China reached 425 as of Monday, from 20,438 cases.
“Given the extent of the shutdowns in China as well as the rapid rise in the virus that is likely to continue through March or April, a significant hit to China and regional growth is very likely,” said JPMorgan economist Joseph Lupton.
“We would assume that in addition to bridging any funding stresses, fiscal policies will need to be ramped up to support growth once the contagion gets under control.”
Shanghai blue chips .CSI300 slid almost 8% on Monday as markets resumed from the Lunar New Year holiday.
A swath of commodities from copper to iron ore joined oil in the dumpster amid fears the drag on Chinese industry and travel would sharply curb demand for fuel and resources.
Early Tuesday, MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS had inched up 0.1%, led by gains in South Korea .KS11 and Australia . Japan’s Nikkei .N225 pared opening losses to be off 0.2%.
E-Mini futures for the S&P 500 ESc1 were flat after results from Alphabet Inc (GOOGL.O) disappointed, though that followed a 0.7% bounce overnight.
Factory activity rebounded in January after contracting for five straight months amid a surge in new orders.
The ISM index rose to 50.9, the highest since July, from an upwardly revised 47.8, though the survey was taken before the virus spread in earnest.
The upbeat report nudged Treasury yields up from deep lows and gave the U.S. dollar a modest lift.
Against a basket of currencies, the dollar bounced back to 97.837 .DXY from a trough of 97.406.
Sterling was nursing a grudge at $1.2990 GBP= having shed 1.6% overnight when the UK government laid out a tough opening stance for future trade talks with the European Union following its departure from the bloc last week.
The fall erased all the gains made after the Bank of England’s decision last week to keep interest rates on hold.
Spot gold was off at $1,577.48 per ounce XAU=, from a top of $1.591.46, as the dollar firmed and safe haven demand waned a little.