Asia report: Markets finish mixed after unscheduled Fed rate cut

Markets in Asia finished in a mixed state on Wednesday, as investors digested an unscheduled interest rate cut from the US Federal Reserve overnight, as the central bank reacted to the ongoing global outbreak of the Covid-19 coronavirus.

In Japan, the Nikkei 225 was up 0.08% at 21,100.06, as the yen weakened 0.35% against the dollar to last trade at JPY 107.50.

Of the major components on the benchmark index, automation specialist Fanuc was down 0.2% and technology conglomerate SoftBank Group was 1.57% lower, while Uniqlo owner Fast Retailing gained 1.16%.

The broader Topix index went in the other direction, falling 0.17% by the end of trading in Tokyo to close at 1,502.50.

On the mainland, the Shanghai Composite was 0.63% firmer at 3,011.67, and the smaller, technology-centric Shenzhen Composite managed gains of 0.36% to settle at 1,895.74.

The unofficial Caixin/Markit services purchasing managers’ index was released during the day, plunging well into contraction territory for February to a reading of 26.5.

It was at 51.8 for January, with the 50-point level separating expansion from contraction.

South Korea’s Kospi was 2.24% higher at 2,059.33, while the Hang Seng Index in Hong Kong slipped 0.24% to 26,222.07.

Investors in the special administrative region were reacting to IHS Markit’s purchasing managers’ index for Hong Kong on Wednesday, which reached its lowest ever level in February, at 33.1.

Both of the blue-chip technology stocks were higher in Seoul, with Samsung Electronics up 3.61% and chipmaker SK Hynix adding 1.62%.

The gains in Korea came after the government released a budget proposal to spend KRW 11.7trn in a bid to fight the coronavirus outbreak.

According to the Korea Centers for Disease Control and Prevention, the country has more than 5,300 confirmed cases of the virus - the largest number of infections outside of mainland China.

“It can be hard to tell what news investors are going to glom onto,” said Spreadex analyst Connor Campbell.

“For example, China’s Caixin services PMI plunged from 51.8 to 26.5 month-on-month, a level last seen during the financial crisis.

“Yet at the same time overnight the World Bank pledged $12bn to combat the coronavirus, another injection of stimulus following a rate-slashing Fed on Tuesday and Australia’s cash rate cut on Monday.”

Oil prices were higher as the region went to bed, with Brent crude last up 1.39% at $52.54 per barrel, and West Texas Intermediate 1.38% higher at $47.84.

In Australia, the S&P/ASX 200 was off 1.71% at 6,325.40, even after the country’s fourth quarter gross domestic product rose above expectations.

The measure increased by a seasonally-adjusted 0.5% during the quarter, according to the Australian Bureau of Statistics, which was ahead of the 0.3% improvement anticipated by economists polled by Reuters.

Market watchers in the sunburnt country were looking past the data, however, and focusing on the growing coronavirus outbreak, given the fourth quarter GDP figures would not be reflective of its effects.

The Reserve Bank of Australia cut its official cash rate by 25 basis points to a record low of 0.5% on Monday, with governor Philip Lowe saying that the coronavirus outbreak was having a “significant effect” on the Australian economy, particularly in the education and travel sectors.

Across the Tasman Sea, New Zealand’s S&P/NZX 50 was 0.63% higher after reversing early losses in afternoon trading.

Wellington’s bourse was led higher by utility plays, with broadband network operator Chorus rising 4%, while energy firms Contact Energy, Genesis Energy, Mercury NZ and Trustpower all grew by between 1.8% and 3.5%.

Both of the down under dollars were stronger on the greenback, with the Aussie last ahead 0.64% at AUD 1.5093, and the Kiwi advancing 0.36% to NZD 1.5879.