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Mainland China Shares Plunge Ahead of World Health Organization Global Health Emergency Decision

Australian employment outpaced forecasts for a second month in December pushing the jobless rate to a nine-month low, a much-needed improvement that could forestall a near-term cut in interest rates. Japan posted a deficit for a second straight year last year as its exports were hurt by a slowdown of demand in China amid a tariff war with the United States.
James Hyerczyk

The major Asia Pacific stock indexes settled sharply lower on Thursday as the death toll rises in China due to a virus outbreak. At this time, it’s fear and uncertainty driving the price action, but with more than 500 confirmed cases and 17 deaths in China from the new coronavirus, investors aren’t taking any chances that this blows up into a major pandemic that could have a negative impact on the global economy.

On Thursday, Japan’s Nikkei 225 Index settled at 23795.44, down 235.91 or -0.98%. South Korea’s KOSPI Index finished at 2246.13, down 21.12 or -0.93% and Hong Kong’s Hang Seng Index closed at 27909.12, down 431.92 or -1.52%.

China’s Shanghai Index settled at 2976.53, down 84.23 or -2.75% and Australia’s S&P/ASX 200 Index finished at 7088.00, down 44.70 or -0.63%.

Investors Await World Health Organization Decision

On Wednesday, the World Health Organization (WHO) may have rattled investors when it postponed a decision on Wednesday over whether to declare the disease a global health emergency. The decision has been moved to Thursday.

If the WHO makes an emergency announcement, investors may start liquidating positions more aggressively, in anticipation of a significant economic impact from the virus.

Traders remained anxious about the spread of the virus as China gears up to celebrate the Lunar New Year, which starts this weekend, a peak period for travel.

On strategist told CNBC on Thursday that the situation at present was “very much wait and see.”

“Wait till after Chinese New Year,” David Roche, president & global strategist at Independent Strategy, told CNBC’s “Squawk Box” on Thursday, adding that “a much clearer idea on morality” is likely to be present by then. “After Chinese New Year, we will know the degree, the speed and …the breadth…of infections…by this virus.”

Australian Labor Reports Beat Expectations

Australian employment outpaced forecasts for a second month in December pushing the jobless rate to a nine-month low, a much-needed improvement that could forestall a near-term cut in interest rates.

Thursday’s data showed 28,900 net new jobs were created in December, beating forecasts of 15,000 and on top of a surprisingly strong 38,400 gain in November.

The unemployment rate edged down a tick to 5.1%, the lowest reading since March last year and again under forecasts.

The news took a February rate cut by the Reserve Bank of Australia (RBA) off the table, sending the Australian Dollar higher.

Japan Logs 2nd Straight Year of Red Ink on Trade Last Year

Japan posted a deficit for a second straight year last year as its exports were hurt by a slowdown of demand in China amid a tariff war with the United States.

Government data released Thursday showed Japan’s exports fell 5.6 percent in 2019, to 76.9 trillion yen ($701.6 billion), while imports fell 5.0 percent to 78.6 trillion yen. That left a deficit of 1.6 trillion yen.

Japan had a trade surplus of 6.6 trillion yen with the United States last year, as exports fell 1.4 percent from 2018, and imports fell 4.4 percent.

Exports and most imports from around the world also declined amid a global slowdown. Exports to China dropped nearly 8 percent, matching the drop in exports to all of the rest of Asia.

In December, exports continued to fall, but at a slower pace than the month before, dropping 6.3 percent, while imports slipped nearly 5 percent.

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