Asia report: Stocks mixed as Japan economy shrinks, China cuts rates

In Japan, the Nikkei 225 was down 0.69% at 25,523.24, as the yen weakened 0.1% against the dollar to last trade at JPY 109.89.

Of the major components on the benchmark index, automation specialist Fanuc was up 0.87% and technology conglomerate SoftBank Group rose 0.42%, while Uniqlo owner Fast Retailing was 1.51% lower.

The broader Topix index was 0.89% weaker by the end of its session in Tokyo, finishing the day at 1,687.77.

In economic news out of Japan, the country’s economy shrank at an eye-watering 6.3% year-on-year in the fourth quarter - significantly worse than the 3.7% fall expected by economists.

The fall came after an increase in consumption tax was enacted last autumn, and was worse than the slump seen after a previous hike in consumption tax in 2014.

On the mainland, the Shanghai Composite was up 2.28% at 2,983.62, and the smaller, technology-heavy Shenzhen Composite rose 3.18% to 1,835.96.

Sentiment was rosier in China, after finance minister Liu Kim said over the weekend that Beijing was planning a series of targeted tax cuts and an increase in government spending.

The Ministry of Finance said in an earlier statement that it would make CNY 8bn available for its second round of support for the prevention and control of coronavirus.

At last count last Friday, China’s financial authorities had provided a total of CNY 90.15bn in support.

Overnight, the People’s Bank of China cut the interest rate on its medium-term funding by 10 basis points to 3.15% - the lowest since 2017.

It also added 100 billion yuan of funds via 7-day reverse repurchase agreements.

The virus is expected to have a “significant” impact on the Chinese economy as well as posing serious risks for the global outlook.

Travel over the Lunar New Year holiday period was described over the weekend as being a “fraction” of previous years in China, as residents stayed home and took up refund policies enacted by authorities.

Since the country’s aviation authority implemented its ticket refund policy in January, it said both domestic and foreign carriers had processed 20 million tickets worth more than CNY 20bn.

A representative also told media that the number of flights over the holiday period was around a quarter of what it was last year, while the state railway said the number of trips taken was about one-seventh of what was originally anticipated.

Around CNY 11.5bn in refunds had been processed on railway tickets.

“The suggestion that the Bank of Japan is ready to step in if the coronavirus ‘significantly affects’ the country’s economy appeared to mitigate the blow of that GDP reading, capping the Nikkei’s losses at 0.7%,” said Spreadex analyst Connor Campbell.

“Ditto the hopes that Beijing is willing to pump in more stimulus to try and bubble-wrap China from the full impact of the outbreak - which now stands at 70,548 cases and 1,770 deaths on the mainland.”

South Korea’s Kospi was off 0.06% at 2,242.17, while the Hang Seng Index in Hong Kong was up 0.52% at 27,959.60.

The blue-chip technology stocks were mixed in Seoul, with Samsung Electronics down 0.49% while chipmaker SK Hynix rose 0.48%.

Oil prices were mixed at the end of the Asian day, with Brent crude last down 0.12% at $57.25 per barrel, while West Texas Intermediate added 0.04% to $52.07.

In Australia, the S&P/ASX 200 was off 0.07% at 7,125.10, while across the Tasman Sea, New Zealand’s S&P/NZX 50 added 0.33% to 11,873.98, as a weaker New Zealand dollar helped to boost the value of the overseas earnings of a number of companies.

The down under dollars were a mixed picture against the greenback, with the Aussie last 0.12% stronger at AUD 1.4876, while the Kiwi weakened 0.08% at NZD 1.5552.