Asia Stocks Set to Drop as China Traders Return: Markets Wrap

Asia Stocks Drop as China Traders Return; Oil Dips: Markets WrapAsia Stocks Drop as China Traders Return; Oil Dips: Markets Wrap

(Bloomberg) — Asian stocks retreated ahead of the reopen of mainland Chinese markets as a deadly virus outbreak showed no signs of slowing. U.S. equity futures edged higher along with the offshore yuan in a sign of some stabilization after the China’s government unveiled support measures.

Shares opened lower in Tokyo, Sydney and Seoul, while traders braced for China’s onshore currency and equities to begin trading later on Monday after a holiday. S&P 500 Index futures rose about 0.2% after the gauge slumped 1.8% on Friday. Investors are assessing intervention from China’s central bank, which is providing more than $21 billion of liquidity.

Among the weekend’s coronavirus developments, a man died in the Philippines in the first fatality outside China and China’s death toll reached at least 360. Oil fell amid concern demand in the world’s second-largest economy is plunging. Australian bonds climbed with the three-year yield heading for a record low.

Investors are preparing for more turmoil after global equities last week posted the worst week since August amid concern growth will falter as the virus spreads. The People’s Bank of China pledged 150 billion yuan ($21.7 billion) in liquidity, but that may not be enough to prevent the country’s stocks and currency from falling, analysts said. Airlines in Asia, Europe and the Middle East have stopped services to mainland China.

“It’s way too early to dismiss this outbreak as just a brief interruption of constructive markets,” said Erik Nielsen, group chief economist at UniCredit Bank AG in London. “If the outbreak does not dissipate soon, the authorities in both China and elsewhere are likely to extend travel bans, people will stay at home, and the increase in uncertainty will cause consumers to delay consumption and firms to defer investment.”

Elsewhere, the pound dipped as investors reacted to a report that U.K. Prime Minister Boris Johnson could walk away from talks over Britain’s future trade relationship with the European Union.

Here are some key events coming up:

The first contest to choose a Democratic nominee to run against Donald Trump in November is the Iowa caucuses Monday.The Caixin China PMI barometer of manufacturing is also due on Monday, followed later by the U.S. manufacturing gauge from the Institute for Supply Management. There are also a slew of other PMIs, including India and Brazil.Tuesday brings a policy decision from the Reserve Bank of Australia.Friday has the U.S. employment report for January.

These were the main moves in markets:

Stocks

Japan’s Topix index lost 1.4% as of 9:12 a.m. in Tokyo.South Korea’s Kospi index retreated 1.5%.Australia’s S&P/ASX 200 Index dropped 1.4%.Future on the S&P 500 added 0.3%. The index declined 1.8% on Friday.

Currencies

The yen was at 108.37 per dollar, little changed.The offshore yuan rose 0.1% to 6.9916 per dollar.The euro bought $1.1089.The pound lost 0.2% to $1.3181.

Bonds

The yield on 10-year Treasuries ticked up one basis point to 1.52%.Australia’s 10-year yield dropped five basis points to 0.90%. The three-year yield fell about five basis points to 0.57%.

Commodities

West Texas Intermediate crude lost 1.5% to $50.80 a barrel.Gold was steady at $1,589.01 an ounce.

To contact the reporter on this story: Adam Haigh in Sydney at ahaigh1@bloomberg.net

To contact the editors responsible for this story: Christopher Anstey at canstey@bloomberg.net, Andreea Papuc

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