Financial news

Asia stocks fall after Trump warns of big coronavirus death toll

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Via Financial Times

Global markets began the second quarter of 2020 on the back foot, as stocks across Asia weakened on new signs of the pressure the coronavirus pandemic is piling on economies around the world.

Following the worst quarter for equities since the global financial crisis, investors on Wednesday were braced for more bad news about the epidemic after President Donald Trump warned that nearly 250,000 people could die in the US due to the virus.

Futures were tipping Wall Street’s S&P 500 to open down 1.9 per cent later in the day, and a 2.6 per cent opening decline for London’s FTSE 100.

Japan’s Topix index shed 1 per cent after data showed the country’s factory activity shrank in March as a result of the virus. Hong Kong’s Hang Seng dropped 0.9 per cent as shares in HSBC and Standard Chartered fell after the two banks bowed to pressure from financial regulators to halt dividends during the pandemic.

Investors have been closely watching China’s economic data for clues on how the world’s second-biggest economy recovers after authorities managed to contain the country’s own outbreak. 

China’s CSI 300 index of Shanghai- and Shenzhen-listed stocks edged up 0.7 per cent after a private survey by IHS Markit signalled modest growth in manufacturing activity in March, following a contraction in the previous month.

However, analysts warned it was too early to determine if China’s economy was out of the woods. “The slow pace of improvement implied by last month’s PMIs is consistent with our view that China faces a drawn-out recovery from the Covid-19 outbreak,” said Martin Rasmussen, an economist at Capital Economics.

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Zhong Zhengsheng, chief economist at CEBM Group, noted “limited improvement” in Chinese business conditions in March, but added that many companies in the country were still laying off workers and losing export orders as the crisis spreads worldwide.

Elsewhere, South Korea’s Kospi slid 0.9 per cent after IHS Markit’s purchasing managers’ index showed the biggest decline in goods production since 2009 in March due to the impact of coronavirus.

Robert Carnell, Asia-Pacific head of research at ING, said Wednesday’s Asia readings confirmed a “grim picture” for manufacturers. He added that “the prospect for most economies’ manufacturing sectors as they head into the second quarter is for even more weakness, exacerbated where lockdown measures are newly enacted or tightened”. 

Global equities have rallied over the last week as investors pinned their hopes on huge stimulus efforts by policymakers and the eventual slowing of the spread of Covid-19. But there are fears that the optimism is fading, with the S&P 500 closing 1.6 per cent lower overnight.

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After having previously downplayed the pandemic, Mr Trump warned on Tuesday that between 100,000 and 240,000 people in the US could die as a result of coronavirus even if Americans follow social distancing guidelines. He warned Americans to prepare for a “very, very painful two weeks”.

The yield on 10-year US Treasuries, viewed as a haven during times of market uncertainty, slipped 0.04 percentage point to 0.627 per cent. Yields fall as bond prices rise.

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