Shares jump as Chinese trade data beat expectations

But analysts warn that the coronavirus outbreak could still have damaging effects on the global economy.

Asia stock markets virus
The number of new coronavirus cases is expected to have peaked in several cities, shifting the discussion among investors to when restrictions might be lifted, according to JP Morgan analysts [File: Aly Song/Daylife]

Asian stocks rebounded on Tuesday after China posted better-than-expected trade data for March, although investors remained concerned about the prolonged economic effects of the coronavirus outbreak.

China’s exports in March fell by 6.6 percent from the same period a year earlier, a smaller drop than the 14 percent plunge that analysts had predicted. Imports eased a modest 0.9 percent compared with expectations for a 9.5 percent drop.

Chinese shares strengthened on Tuesday with its blue-chip index up 0.9 percent. Australian shares were up 1.1 percent while Japan’s Nikkei gained 2.2 percent.

Hong Kong’s Hang Seng rose 0.6 percent.

That sent MSCI’s broadest index of Asia-Pacific shares, excluding Japan, rallying by more than 1 percent.

E-Mini futures for the United States S&P 500 were higher by 1.2 percent ahead of Tuesday’s open on Wall Street.

But it is still too soon to say the worst is over for fiancial markets, analysts warned, as the coronavirus shutters businesses around the world, crippling demand and economic growth.

“With economic activity in the rest of the world now collapsing, the worst is still to come for China’s export sector,” Julian Evans-Pritchard, senior China economist at Capital Economics said in a note to clients seen by Al Jazeera.

“Although supply-side disruptions to factory activity have now eased, foreign demand will slump this quarter as COVID-19 weighs on economic activity outside of China,” he said.

Indeed, some analysts say any optimism over signs the outbreak may be peaking in hard-hit cities is quickly being offset by concerns that it may be a while before businesses recover.

“Signs of the outbreak peaking – or at least slowing in some regions – have started to turn the talk to when restrictions on activity can be eased,” analysts at JPMorgan said in a note.

“Short of the unlikely near-term event of a vaccine or significant herd immunity, restarting economies … may be challenging,” the analysts wrote.

Wall Street indexes ended mixed on Monday with the Dow Jones industrial average and S&P 500 falling while a 6.2 percent gain in Amazon shares helped the Nasdaq finish higher.

In Asia, an expected trade slump in China will reinforce views that the world is headed for a global recession this year, despite an unprecedented burst of stimulus from policymakers in the last two months to shore up growth.

Many analysts already expect China’s economy, the world’s second-largest, to have contracted sharply in the March quarter for the first time since at least 1992. China reports its first-quarter gross domestic product data on April 17.

A weak report could see China boost monetary and fiscal stimulus in a bid to reflate its economy.

“If we see greater signs that China is vigorously supporting domestic economic activity, then the global industrial cycle will recover with great alacrity in the second half of 2020,” Montreal-based BCA Research wrote in a note on Monday.

“This will be positive for commodities, especially industrial metals, but it will hurt the US dollar and push yields higher,” it added. Bond yields increase as their prices fall. 

“It would also arrest the stimulus-driven outperformance of US equities, due to their low exposure to industrials, materials and financials.”

Elsewhere, the United Kingdom’s finance minister told colleagues the UK economy could shrink by up to 30 percent this quarter due to the coronavirus lockdown that has shuttered businesses.

In another sign of worries about struggling global demand, oil prices barely reacted to a global deal to cut output by a record amount of nearly 10 percent of world supply. US crude was up just 35 cents at $22.8, well below its January peak of $63.27.

Brent crude gained 49 cents to $32.23 a barrel.

A skittish market helped gold prices cling to highs not seen in more than seven years at $1,715.6 an ounce. Investors tend to seek the safety of gold during periods of market and economic instability.

In the US, which has recorded the world’s highest number of casualties from the virus, President Donald Trump said on Monday his administration was close to completing a plan to reopen the US economy. However, some state governors have signalled that the decision on when to restart businesses lay with them.

The dollar continued to extend losses on the back of the US Federal Reserve’s enormous new lending programme. The greenback was a touch weaker against the Japanese yen at 107.62. The euro was up slightly at $1.0923. The risk-sensitive Australian dollar jumped 0.5 percent to $0.6415.

Source: Al Jazeera, News Agencies