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Asian Markets Pressured as Virus Containment Concerns Outweigh Stimulus Efforts

Asian shares are also being dragged down by oil prices, which tumbled as fears mounted that the global shutdown for the coronavirus could last for months, doing untold harm to economies.
James Hyerczyk

Early in the session on Monday, a few major Asia-Pacific stock indexes are trading lower as investors continue to assess the economic impact of the global coronavirus pandemic that continues to spread rapidly while further pushing the global economy toward recession.

Last week, the Asian markets were primarily supported by positive developments in the United States – namely unlimited monetary policy aid from the Federal Reserve and a $2.2 trillion fiscal aid package from the U.S. government. This seemed to bring hope to investors on the other side of the Pacific, but early Monday that hope is being crushed by the alarming rise in the number of U.S. coronavirus cases.

At 01:07 GMT, Japan’s Nikkei 225 Index is trading 18722.52, down 666.91 or -3.44%. South Korea’s KOSPI Index is at 1667.41, down 50.32 or -2.93% and Australia’s S&P/ASX 200 Index is at 4898.20, up 55.80 or +1.15%.

More Volatility Expected

Markets have been volatile in recent weeks, seeing sharp swings in both directions as central banks and governments across the globe announced vast amounts of monetary and fiscal stimulus, respectively, to stem the economic impact of the virus. Investors are being forced into two camps – those who believe the monetary stimulus is enough to slow down the decay in the global economy and those who believe the markets won’t reach a bottom until the curve of new cases of the coronavirus begins to flatten on a global basis.

“The big question for markets is whether the huge stimulus introduced so far across the globe will be enough to help the global economy withstand the economic shock from the COVID-19 containment measures,” Rodrigo Catril, a currency strategist at National Australia Bank (NAB), wrote in a note.

“To answer this question one needs to know the magnitude of the containment measures and for how long they will be implemented,” Catril said. This was “unknown” at this point, he said, and suggests that markets are “likely to remain volatile” until the uncertainty is resolved.

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Oil Prices Tumble as Virus Damage Deepens

Asian shares are also being dragged down by oil prices, which tumbled as fears mounted that the global shutdown for the coronavirus could last for months, doing untold harm to economies.

“We continue to mark down 1H20 global GDP forecasts as our assessment of both the global pandemic’s reach and the damage related to necessary containment policies has increased,” said JPMorgan economist Bruce Kasman.

The investment banks analysts now predict global GDP could fall at a 10.5% annualized rate in the first half of the year.

The new buzz phrases are “containment policies” and “containment measures”. Even after last week’s major stimulus moves by governments and central banks, the early price action suggests investors are saying, but “what have you done for me lately.”

British authorities warned over the weekend that lockdown measures could last months. President Trump, who talked about reopening the U.S. economy for Easter, on Sunday extended guidelines for social restrictions to April 30.

Japan on Monday expanded its entry ban to include citizens travelling from the United States, China, South Korea and most of Europe.

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