Asian shares start week with losses due to coronavirus pandemic

Jason Collie
AFP via Getty Images

Asian shares started the week with fresh losses as the coronavirus outbreak continues to shut down travel and business in many parts of the world.

Japan’s benchmark dropped almost 4 per cent and other regional markets were mostly lower. Shares in Australia rose after the government promised more recession-fighting stimulus.

US futures fell slightly more than 1 per cent and oil prices were also lower.

Monday’s drop followed a decline of more than 3 per cent on Wall Street on Friday despite hopes that a US$2 trillion (£1.6 trillion) relief bill would ease the economic havoc brought by the pandemic.

“Sentiment once again took a turn for the worse going into a week of reckoning by means of economic fundamentals,” Jingyi Pan of IG said in a commentary.

“The rally seen for Wall Street last week may amount to little more but a relief rally with sentiment turning sour once again going into a fresh week.”

The S&P 500 still gained 10.3 per cent last week, its biggest weekly win since 2009.

The Dow Jones Industrial Average’s 12.8 per cent weekly gain was its biggest since 1938. But the market is still down 25 per cent from the peak it reached a month ago.

Early Monday, Tokyo’s Nikkei 225 dropped 3.7 per cent to 18,680.72 and the Kospi in South Korea lost 2.3 per cent to 1,678.51.

The Shanghai Composite shed 1.6 per cent to 2,728.65, while the Hang Seng in Hong Kong lost 1.8 per cent to 23,070.19.

Australia’s S&P/ASX 200 added 2.3 per cent to 4,955.70 as the government prepared to announce fresh economic support measures for businesses.

The push to deliver financial relief has gained urgency as the outbreak widens.

However the damage to corporate profits, the ultimate driver of stock prices, remains uncertain.

Very few companies have dared to issue forecasts capturing the damage, though traders are girding for discouraging results in the next few weeks as earnings reporting season begins.

Many companies have simply withdrawn their profit forecasts altogether.

At the start of this year, analysts expected S&P 500 companies’ earnings would grow 4.4 per cent in the January-March quarter.

They now expect earnings will be down 4.1 per cent, according to FactSet.

Earnings for airlines, which have been hit by lost bookings as businesses and individuals cancelled travel plans to minimise their risk of contracting the virus, are expected to be catastrophic. Delta went from an expected 2.2 per cent decline to a 108 per cent plunge.

The S&P 500 lost 3.4 per cent on Friday to 2,541.47. The Dow slid 4.1 per cent, to 21,636.78. The Nasdaq lost 3.8 per cent to 7,502.38. The Russell 2000 index of smaller company stocks fell 4.1%, to 1,131.99.

The price of crude oil also declined on Monday.

US benchmark crude dropped 5.1 per cent to $20.40 (£16.52) per barrel in electronic trading on the New York Mercantile Exchange.

It ultimately slid 4.8 per cent on Friday.

Goldman Sachs has forecast that it will fall well below $20 (£16.20) a barrel in the next two months because storage will be filled to the brim and wells will have to be shut in.

Brent crude, the international standard, gave up 4.6 per cent to $26.67 (£21.60) per barrel.

Lower oil prices spell trouble for energy companies, which are lagging far behind the rest of the market.

The price of oil has plunged recently, in part due to a price war that broke out early this month between Saudi Arabia and Russia.

The energy sector of the S&P 500 has lost half its value this year.

The yield on the 10-year Treasury slipped to 0.65 per cent from 0.68 per cent late on Friday.

Lower yields reflect dimmer expectations for economic growth and greater demand for low-risk assets.

The Associated Press contributed to this article

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