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James Hyerczyk

Asia Pacific shares finished mostly lower on Monday with China’s stock market bucking the trend to finish higher for the session. Investors were primarily bearish at the start of the week as they continued to monitor the ongoing coronavirus’ impact on China’s economy. Meanwhile, Chinese investors had another take on the event, turning into buyers as factories reopened on Monday after the Lunar New Year holiday.

On Monday, Japan’s Nikkei 225 Index settled at 23685.98, down 142.00 or -0.60%. Hong Kong’s Hang Seng Index closed at 27241.34, down 162.93 or -0.59% and South Korea’s KOSPI Index finished at 2201.07, down 10.88 or -0.49%.

China’s Shanghai Index settled at 2890.40, up 14.52 or +0.51% and Australia’s S&P/ASX 200 closed at 7012.50, down 10.10 or -0.14%.

European markets are trading slightly lower on Monday amid ongoing concerns around the coronavirus outbreak in China. Shares in the United States are mostly flat as earnings season winds down ahead of key Congressional testimony by Federal Reserve Chairman Jerome Powell on Tuesday and Wednesday.

China’s Producer Price Inflation Rise

China’s factory-gate prices snapped six months of year-on-year declines in January, although prolonged business closures from the coronavirus outbreak mean positive momentum is unlikely to persist.

China’s producer price index (PPI) gained 0.1% in January, Reuters reported Monday citing official data. Consumer prices also rose 5.4% year-on-year, higher than a 4.9% increase expected by analysts in a Reuters poll.

Analysts attributed the PPI rise to improving activity in the industrial sector at the end of last year, buoyed by a trade truce with the United States and government stimulus, which finally appeared to gain traction.

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PPI Gains May Not Be Sustainable

However, those gains are not expected to be sustained amid growing economic headwinds from the coronavirus.

“Notwithstanding different coronavirus scenarios, we maintain our view that China’s mini-cycle recovery will be delayed, but not derailed,” said economists at Morgan Stanley in a note to clients on Monday.

Morgan Stanley estimates that the coronavirus could slash up to 2 percentage points off China’s first quarter growth if factory suspensions nationwide would continue beyond February.

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