Asian markets mixed: Japan skids; China helped by rate cut
This is a file image of various stocks.
BANGKOK -- Shares rose in Europe after a mixed session in Asia on Monday, with Shanghai's benchmark jumping 2.3% after the central bank rolled out more support for the economy amid a spreading virus outbreak that has infected more than 71,000 people in more than two dozen countries.
Britain's FTSE 100 gained 0.2% to 7,425.36 in early trading. In Paris, the CAC 40 was flat, at 7,409.13, while Germany's DAX added 0.2% to 13,766.96. The future for the S&P 500 was up 0.2% at 3,388.10, while the future for the Dow Jones Industrial Average edged 0.1% higher to 29,435.00.
The Nikkei 225 index in Tokyo skidded 0.7%, to 23,523.24 after the government reported the economy contracted 6.3% in annual terms in the last quarter.
Analysts said the contraction in the Japanese economy, the world's third-largest, reflected the impact of typhoons, trade tensions and crimped consumer spending after the sales tax rose to 10% from 8% as of Oct. 1. The seasonally adjusted economic data was announced as Prime Minister Shinzo Abe faces pressure over spreading cases of the new viral illness COVID-19 and markets around the region see a mounting toll from its impact on travel and tourism as authorities strive to contain it.
"Consumer spending, which slumped following the tax hike in the fourth quarter of 2019, will now struggle to do anything except contract further in the first quarter as the impact of Covid-19 weighs on consumer sentiment, weighing in particular on the consumer services sector," ING said in a report.
"Some further government spending may help to curb any further contraction in GDP beyond 1Q20. But that will not stop what started off as a technical downturn from evolving into a full-blown recession," it said.
The Shanghai Composite index jumped 2.3% to 2,983.62 after the central bank and government announced a slew of measures to support the economy as the country battles an outbreak of a new virus that has killed 1,774 people and infected more than 71,000 worldwide.
The People's Bank of China cut its one-year medium-term lending rate to 3.15% from 3.25%. The central bank also injected some 300 billion yuan ($43 billion) into the markets through short-term purchases of securities and other injections of cash.
Such moves will likely be followed by still more, said Julian Evans-Pritchard of Capital Economics, given that many of the companies worst affected by the virus outbreak are smaller ones that lack access to loans from major state-run banks.
The government has also announced plans for tax cuts and other measures to help companies struggling with shut-downs of cities and plunging consumer spending and travel.
"We think the PBOC will need to expand its re-lending quotas and relax constraints on shadow banking in order to direct more credit to struggling SMEs," Evans-Pritchard said in a commentary.
Elsewhere in the region, Sydney's S&P ASX/200 edged 1% lower to 7,125.10. South Korea's Kospi fell 0.1% to 2,242.17, while the Hang Seng in Hong Kong climbed 0.5% to 27,959.60. India's Sensex shed 0.4% to 41,082.82.
Wall Street closed out a wobbly session Friday with the major stock indexes notching their second straight weekly gain. Trading was mostly subdued and cautious following China's report Thursday of a surge in cases of a new virus that raised fresh concerns about global economic growth.
The S&P 500 index rose 0.2% to 3,380.16. The Nasdaq composite gained 0.2%, to 9,731.18. Both indexes were lower for most of the afternoon. The Dow dropped 0.1%, to 29,398.08. The Russell 2000 index slid 0.4%, to 1,687.58.
Bond prices rose. The yield on the 10-year Treasury was at 1.59% from 1.58% late Friday.
Benchmark U.S. crude oil picked up 2 cents to $52.07 per barrel in electronic trading on the New York Mercantile Exchange. It closed 1.2% higher on Friday, notching its first weekly gain in six weeks. Brent crude oil, the international standard, lost 6 cents to $57.26 a barrel.
The slide in oil prices has weighed on energy stocks. The sector is the biggest loser in the S&P 500, down 10.2% so far this year.
More than three quarters of S&P 500 companies have reported earnings and the results so far show solid growth. Companies are expected to report overall profit growth of just under 1% when all the reports are in, according to estimates from FactSet.
Several big companies are on deck to report results this week, including Walmart on Tuesday and John Deere on Friday.
On Wednesday, the government will issue its report on producer prices, which measures inflation pressures before they reach consumers and there will be updates on the health of the housing industry. The Federal Reserve will release minutes from its January meeting.
In other commodities trading, gold lost $2.80 cents to $1,583.60 per ounce, silver rose 3 cents to $17.77 per ounce and copper fell 1 cent to $2.61 per pound.
The dollar rose to 109.85 Japanese yen from 109.77 yen on Friday. The euro rose to $1.0845 from $1.0839.