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Asian Markets: China Shares Rise on Fresh Stimulus Measures; Japan Bracing for Recession

The Shanghai Index rose after China’s central bank cut the interest rate on its medium-term lending on Monday. The Nikkei 225 Index stumbled after official data showed the economy shrank in October-November at the fastest pace since the second quarter of 2014.
James Hyerczyk

The major Asia Pacific stock indexes finished mixed on Monday as investors continued to assess the potential economic damage from the coronavirus outbreak on China’s economy. Volume was a little light due to a U.S. bank holiday.

Shares in China rose sharply while stocks in Japan fell the most. The price action suggests investors are buying Chinese stocks in anticipation of additional stimulus from the government to offset the damage the virus has reaped on its economy. Shares in Japan declined in reaction to disappointing economic growth data.

On Monday, Japan’s Nikkei 225 Index settled at 23523.24, down 164.35 or -0.69%. South Korea’s KOSPI Index finished at 2242.17, down 1.42 or -0.06% and Hong Kong’s Hang Seng closed at 27975.57, up 159.97 or +0.58%.

In China, the Shanghai Index settled at 2983.62, up 66.61 or +2.28% and in Australia, the S&P/ASX 200 finished at 7125.10, down 5.10 or -0.07%.

Coronavirus Cases Rise Again in China as Recession Looms for Japan, Singapore

The number of reported new cases of coronavirus in China’s Hubei province rose on Monday after two days of falls, as authorities imposed tough new restrictions on movement to prevent the spread of the disease which has now killed more than 1,700 people.

With no end in sight for the outbreak, Japan and Singapore appeared to be on the brink of recession with data Monday pointing to possible contractions in the current quarter.

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China

Across China many factories remain closed following the extended Lunar New Year holiday, disrupting supply chains around the world.

The Shanghai Index rose after China’s central bank cut the interest rate on its medium-term lending on Monday, a move expected to pave the way for a reduction in the benchmark loan prime rate on Thursday, to lower borrowing costs for companies hit by the virus.

Beijing also announced plans on Sunday to roll out targeted and phased tax and fee cuts to help relieve difficulties for businesses.

Japan

The Nikkei 225 Index stumbled after official data showed the economy shrank in October-November at the fastest pace since the second quarter of 2014.

Virus-related damage to Japan’s economy is expected to show up in the current quarter, stoking fears of recession in the world’s third-largest economy.

Japan’s Cabinet Office data revealed the Japanese economy shrunk at an annualized pace of 6.3% in the three months that ended in December. Analysts in a Reuters poll were predicting an annual decline of 3.7%. On-quarter, GDP fell 1.6%.

Australia

Australian shares ended lower on Monday as losses in the country’s leading four banks eclipsed strong corporate earnings, while investors weighed the near-term hit on global growth from the coronavirus outbreak.

The so-called ‘big four’ banks, after marking strong gains last week, were all in the red led by Commonwealth Bank of Australia.

New Zealand

New Zealand’s Prime Minister Jacinda Ardern lowered her country’s gross domestic product (GDP) growth forecast range to nearly 2%-2.5% this year due to the economic impact of the coronavirus outbreak.

It came in below the previous prediction of GDP growth of 2.2% to 2.8%. She said the impact will be seen in the first two quarters of the year.

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