Most global shares up, tracking Wall St gains; Nikkei falls

TOKYO (AP) – Global shares tracked overnight gains on Wall Street, although Tokyo’s benchmark fell back yesterday as concerns over the virus outbreak gnawed at buying sentiment.

France’s CAC 40 gained 1.4 per cent in early trading to 5,408.15, while Germany’s DAX rose 1.6 per cent at 12,045.32. Britain’s FTSE 100 jumped 2.1 per cent to 6,792.48.

United States (US) shares were set for further gains after a huge rally on Monday, with Dow futures adding 1.1 per cent to 26,761.00. S&P 500 futures rose one per cent to 3,096.10.

Traders were awaiting talks between central bankers and other financial leaders of the Group of Seven industrial nations on how to tackle the slowdown brought on by the outbreak that began in China and has spread to dozens of countries, killing about 3,100 people and sickening more than 90,000.

“Calibrating the likelihood of coordinated monetary and fiscal policy stimulus remains the central theme for financial markets,” Stephen Innes of AxiCorp said in a commentary.

Japan’s Nikkei 225 lost 1.2 per cent to finish at 21,082.73 after gaining in the morning. Australia’s S&P/ASX 200 rose 0.7 per cent to 6,435.70 after the Reserve Bank of Australia cut its key interest rate to a record-low 0.5 per cent.

People walk past an electronic board showing Hong Kong share index outside a local bank in Hong Kong. PHOTO: AP

South Korea’s Kospi rose 0.6 per cent to 2,014.15. Hong Kong’s Hang Seng fell less than 0.1 per cent to 26,284.82, while the Shanghai Composite advanced 0.7 per cent to 2,992.90.

The mood shifted in Tokyo by midday, as thoughts turned to what the Bank of Japan (BOJ) might be able to do to help counter the slowdown worsened by the outbreak of the new virus that causes a disease called COVID-19. The BOJ’s policy rate has stood at minus 0.1 per cent for several years and the central bank has been purchasing tens of billions of yen worth of government bonds and other assets to help keep credit cheap and stave off deflation as the population in the world’s number three economy ages and shrinks.

But elsewhere in the region the mood was upbeat after the Dow Jones Industrial Average soared, marking its biggest-ever point gain and the biggest percentage increase since March 2009. The huge gains clawed back some of the ground lost last week in a massive sell-off that gave stocks their worst stretch since the financial crisis of 2008.

“So why are markets so pumped by prospects of monetary response; arguably not the most apt tool to address the direct fallout from coronavirus related disruptions?” said Vishnu Varathan at Mizuho Bank in Singapore.

“One reason may be that more nuanced measures to ease cash-flow will offer a reprieve for businesses and households affected by seizures in activity and disruptions in supply chains,” he said.

Malaysia’s central bank also moved to boost its economy, as expected, cutting its key overnight policy rate by 0.25 percentage point to 2.5 per cent.

The virus epidemic that began in central China has been shutting down industrial centres, emptying shops and severely crimping travel all over the world. More companies are warning investors that their finances will take a hit because of disruptions to supply chains and sales.

Amid the worsening outlook, investors are increasingly anticipating that the Federal Reserve and other major central banks around the world will lower interest rates or take other steps to shield the global economy from the effects of the outbreak.

The International Monetary Fund (IMF) and World Bank announced simultaneously on Monday that they are ready to help countries affected by the coronavirus through their emergency lending programmes and other tools.

Head of the European Central Bank (ECB) Christine Lagarde said on Monday that Europe’s top monetary authority is ready to take “appropriate and targetted measures” if necessary to support the economy against the headwinds from the new coronavirus.

US Treasury Secretary Steven Mnuchin and Federal Reserve Chairman Jerome Powell led the call yesterday. The group includes Japan, Germany, Britain and France, among others. The G-7 often issues statements pledging cooperation amid global economic turbulence.

The Organization for Economic Development (OECD), a research organisation made up of mostly advanced economies, said on Monday that the viral outbreak “presents the global economy with its greatest danger since the financial crisis” in 2008.

The OECD cut its world growth forecast and said that even if there are only limited outbreaks outside China, the global economy will grow just 2.4 per cent this year, the weakest since the crisis. That forecast matches several private estimates.

If other countries are hit with outbreaks similar to China’s, growth could fall as low as 1.5 per cent, the OECD said.

ENERGY: Benchmark US crude rose USD1.05 to USD47.80 a barrel in electronic trading on the New York Mercantile Exchange. It jumped USD1.99, or 4.4 per cent, to USD46.75 per barrel on Monday. Brent crude, the international standard, gained 96 cents to USD52.86.

CURRENCIES: The dollar was trading at JPY108.03, down from JPY108.27 on Monday. The euro slipped to USD1.1112 from USD1.1133.