Asia shares struggled following a tough week as investors hoped China could contain the coronavirus
Asia shares fought to regain their footing on Friday as investors hoped China could contain the coronavirus, even amid news of more cases and deaths.
Earlier, Asia shares had a tough week as the coronavirus outbreak continued to impact the economy and businesses shut down their operations.
Meanwhile, surveys showed Chinese manufacturing activity came in much as expected in January while services actually firmed, though this was likely before the virus took full hold.
Activity is also expected to remain low as some Chinese provinces were reportedly asking companies not to re-start until Feb. 10.
For now, sentiment got a timely boost when Amazon’s (AMZN.O) sales blew past forecasts and sent its stock soaring 11% after hours, adding over $100 billion in market worth.
MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS managed to eke out a 0.2% gain, but was still down 4% on the week so far. Its 2.3% dive on Thursday had been the sharpest one-day loss in six months.
Japan’s Nikkei .N225 bounced 1%, but again was off 2.5% for the week. E-Mini futures for the S&P 500 ESc1 added 0.1%, having rebounded 0.5% late on Thursday.
European bourses looked set to open firmer with EUROSTOXX 50 futures STXEc1 up 0.8% and the FTSE FFIc1 0.7%.
The World Health Organization declared a global emergency on Thursday as the virus outbreak spread to more countries.
Tedros Adhanom Ghebreyesus, WHO director-general, said the greatest worry was the potential for the virus to spread to countries with weaker health systems.
Yet investors took heart from his comments that the drastic steps Beijing was taking would “reverse the tide” and contain the outbreak.
Some shorts covered after the director gave the WHO’s stamp of approval to China’s aggressive containment effort, said Stephen Innes, Asia Pacific market strategist at AxiCorp.
Ghebreyesus said, for now, the market’s risk lights have shifted from flickering on red to a steady shade of amber, which could bring more risk back into play.
That helped Wall Street recoup its losses so the Dow .DJI finished up 0.43%, while the S&P 500 .SPX gained 0.31% and the Nasdaq .IXIC 0.26%. After the bell, NASDAQ futures NQc1 pushed 1.3% higher on the Amazon results.
Still, the flow of news on the virus remained bleak with China’s Hubei province reporting deaths from the disease had risen by 42 to 204 as of the end of Jan. 30.
Meanwhile, a number of companies closed their China operations temporarily and more airlines reduced their flights to and from China while a number of countries issued advisories on travelling to China.
JPMorgan shaved its forecast for global growth by 0.3% points for this quarter to reflect the growing impact.
Based on the patterns observed from other epidemics, we assume that the outbreak will likely run its course over 2-3 months, meaning the hit to activity happens in the current quarter, JPMorgan analysts said in a note. Also in line with historical experience, we expect a full recovery to follow.
