Coronavirus News Asia

Markets up on hope for US and China economies


(ATF) Hong Kong: European stocks and US futures open higher on hopes that China will embark upon a stimulus campaign after US President Donald Trump issues a roadmap for reopening of the US economy.

The Stoxx Europe 600 is up 2.6% and S&P futures are 2.4% higher. 10-year US Treasuries yields rose a basis point to 0.63% after Trump announced the decision to reopen was up to the governors of individual states and backed off from a quick loosening of guidelines. “Under these guidelines, States will reopen one step at a time, rather than all at once. The guidelines will empower Governors to tailor the phased reopening to address the situation in their State.”

Risk appetite was also whetted by expectations that China could step up its stimulus campaign after the world’s second largest economy reported first-quarter GDP shrank by 6.8%, as a nationwide lockdown to battle the spread of the coronavirus crimped domestic demand, slammed production activity and halted movement of goods and its 1.4 billion citizens.

“In terms of policies, the Chinese government is on the track of a gradual escalation in its stimulus policies,” said JP Morgan Asset Management Global Market Strategist Chaoping Zhu.

Morgan Stanley analysts said it expected more policy support with the total policy stimulus size likely to reach $800 billion this year, with a 230 bps widening in the cyclically adjusted augmented fiscal deficit (US$400 bn) and $400 bn in quasi-fiscal credit measures.

“While the annual NPC meeting – which confirms the size of fiscal deficit expansion – could be at least a month away, Beijing could ramp-up infrastructure investment by raising the front-loading quota of local govt. special bond in the NPC Standing Committee meeting in the coming few weeks, and accelerate targeted credit supports for SMEs with PBoC re-lending,” Morgan Stanley said in a report. “We also expect another 20bps MLF rate cut and 50-75bps broad-based RRR cut (or equivalent) to facilitate fiscal easing this year.”

China’s domestic consumption, a major driver of economic growth in recent years, has weakened – reflected in the 15.8% decline in retail sales in March and this remains a concern among policymakers.

Data also revealed China’s fixed asset investments fell 16.1% and March retail sales fell 15.8%, all worse than expected. Industrial output was an outlier declining -1.1% versus an expected -6.2%.


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