Asian shares stumble on weak economic data, oil rebounds

Asian stock markets were mixed on Thursday as weak economic data dampened an earlier rise that was led by a rebound in crude prices from historic lows, and the promise of more United States government aid to cushion its coronavirus-ravaged economy.

Better-than-expected US corporate earnings also lifted equities, analysts said, though overall sentiment remained fragile as the pandemic cut a destructive path through the world economy.

But South Korea was the latest to suffer an economic hit from the coronavirus pandemic, with economic growth in its first quarter plunging to its lowest since 2008, according to data released on Thursday. Gross domestic product (GDP) slumped 1.4 percent, largely due to falling consumption as the coronavirus weighed down sentiment and kept people at home.

The outlook for Japan’s services sector shrank at a record pace in April, as retailers took a hit from government requests for citizens to stay home and shops to close or operate at shorter hours than usual.

The country’s producers’ manufacturing index for services plunged to 22.8, its lowest reading since the start of the survey in September 2007.

“The current state of emergency will stay in place until 6 May,” said Joe Hayes, an economist at IHS Markit, which compiles the survey.

MSCI’s broadest index of Asia Pacific shares outside of Japan bounced from two-week lows to be up 0.5 percent at 460.43 points.

Australian S&P/ASX lost 0.6 percent and Japan’s Nikkei climbed 0.8 percent. However, Chinese shares slipped after opening higher in the day, with the Shanghai Composite Index trading 0.1 percent lower after initial gains.

Oil extended gains on signs that producers are cutting production to cope with a collapse in demand for fuel. Brent crude was up 33 cents, or 1.6 percent, at $20.70 a barrel by 02:54 GMT after rising more than 5 percent on Wednesday.

US West Texas Intermediate (WTI) futures were up 28 cents, or more than 2 percent, at $14.06 a barrel, having risen around a fifth in the previous session. US crude futures fell to below minus $40 on Monday on concerns that buyers were running out of storage space to take deliveries.

Futures on the S&P 500 declined 0.4 percent after a strong previous session on Wall Street, with the Dow up 2 percent, S&P 500 adding 2.3 percent and Nasdaq rising 2.8 percent.

All 11 S&P 500 sector indexes climbed as the US Senate unanimously approved the new relief package, adding to trillions of dollars in stimulus that has helped Wall Street rebound from its March lows.

The House of Representatives is expected on Thursday to clear the relief, which would be the fourth coronavirus measure passed by Congress, and would boost the overall federal financial response to almost $3 trillion.

The recent recovery in stock markets has been narrowly focussed on the big tech firms, said Seema Shah, chief strategist at Principal Global Investors.

Four out of every five stocks are still in a bear market while European benchmark equity indices and the US small-cap index are also in bear territory, “throwing severe doubts on the impression that investors are optimistic about the outlook,” she added.

However, Shah believes market positioning may now work to propel markets higher, helped by solid policy stimulus around the world.

“Investors have built up meaningful cash positions suggesting that, not only is indiscriminate selling behind us, but investors have sufficient dry powder to take advantage of attractively valued risk assets.”

In Europe, traders were buoyed after Italy breezed through a major debt sale on Tuesday and speculation continued that the European Central Bank would provide more support measures.

Still, it may take European Union countries until the summer if not longer to agree on how to finance aid to help economies recover from the pandemic as major disagreements persist, a bloc official said on Wednesday.

In currencies, the dollar was barely changed against the Japanese yen at 107.72. It was slightly firm against the risk-sensitive currencies of Australia and New Zealand at $0.6310 and $0.5941 respectively.

The euro was a shade weaker at $1.08 while the British pound was mostly unchanged at $1.2330.

That left the US dollar index at 100.38, down 0.1 percent.