China’s central bank cut interest rates on medium term loans on Monday, an effort to offer support to businesses whose activity has been disrupted or halted completely by coronavirus contagion concerns. The announcement sent Chinese benchmarks higher, where they hovered near a three-week peak. Also increasing optimism in the markets was an announcement by Chin’s Finance Minister on Sunday that Beijing would introduce targeted and phased tax and fee cuts to help stimulate the country’s economy.
The U.S. dollar strengthened against the yen on increased optimism, gaining 0.09 percent as of 2:06 p.m. HK/SIN, to trade at 109.84. Japan’s currency wasn’t the only thing to weaken on Monday afternoon – it’s benchmark index, the Nikkei 225, was also trading lower, pushed down by growing recession risks in the region. Recent reports out of Japan showed that the country’s economy shrank at the fastest pace in Q4 2019 since Q2 2014. Concerns about decreased production output and tourism in Japan only increased concerns that it will take a while for Japan’s economy to recover.
Singapore downgraded its growth forecast for 2020 on Monday, as the country has been one of the hardest-hit by the coronavirus. The country is expected to experience one of its largest fiscal deficits in history this year.
Still, despite these negative reports, trader optimism spread through most Asian stock markets. China’s Shenzhen Composite surged 2.63 percent and the Shanghai Composite jumped 1.75 percent as the death toll fell to “only” 105 on Sunday, and the number of new infections remained relatively stable after spiking steeply over the weekend. Hong Kong’s Hang Seng index gained 0.61 percent, and South Korea’s Kospi edged up 0.09 percent.
Oil futures rose on Monday on expectations that demand would remain stable, or at least not decline as much as originally expected, thanks to the efforts to contain the coronavirus. U.S. WTI futures were up 0.15 percent to $52.13 per barrel, while Brent crude futures eased up a modest 0.03 percent to $57.34 per barrel.
Markets are expected to be fairly quiet on Monday as U.S. markets are closed for the President’s Day holiday.