Asian markets to remain on edge, as China returns to the fray

Kyle Rodda, Market Analyst, Australia

Global markets remain gripped by coronavirus induced volatility. Sentiment in the market took a hit once again on Friday, as several countries, including the US, announced measures to discourage travel to and from China, defying the call from the World Health Organisation a day earlier that it’s currently not necessary to do so. The moves added to concerns that the coronavirus outbreak will restrict considerably the movement of people and goods, and will bring-about a major drag on global economic growth.

Growth proxies tumbled in trade on Friday as a result. Stocks continued to retrace from their record highs, with the S&P500 tumbling 1.77%, for that index’s biggest intraday loss in nearly 6 months. Oil prices also fell by in excess of 1%, as traders price-in the impacts of coronavirus on international travel and global production. Copper prices declined for a 13th straight day, to trade at their lowest point since September. The Australian Dollar has dropped into the 66 cent handle, and SPI Futures are suggesting the ASX200 ought to shed 119 points at Monday’s open.

All eyes will be on the re-open of Chinese financial markets today. Having closed for the Lunar New Year holiday before the worst of Coronavirus hysteria hit, market participants are expecting steep falls for Chinese stocks today. China’s policymakers seem also to be anticipating a nervous day’s trade. The PBOC announced over the weekend it would be injecting $174 Billion worth of short-term funding into the country’s financial system today, in order to contain potential panic in its markets.