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Market Brief: Shanghai Tumbles on Coronavirus – PBOC Steps In

Nikkei 225
Nikkei 225

Chinese stocks tumbled in the first trading session after the holiday of the Lunar New Year. The Shanghai Composite is 7.72% lower at 2746 as the coronavirus fear weighs on China and global growth. The sharp drop in Chinese stocks came despite the fact that the Central Bank of China announced measures to ease the impact of the outbreak by adding liquidity in the markets. The PBOC cut the reverse repo rates by 10 basis points and injected $173 billion of liquidity in markets.

The World Health Organization (WHO) the previous week declared a global emergency as the coronavirus spread to 24 countries. Meanwhile the Philippines during the weekend reported the first coronavirus death outside of mainland China. The U.S. officials announced three more cases in California are bringing the total cases in the U.S. to 11. Now there are more than 17,300 confirmed virus cases worldwide, and the death toll has reached 361.

The Hang Seng index managed to turn positive and as of writing is 0.22% higher at 26370. The Singapore FTSE  Straits Times index finished 1.11% lowe rat 3118. The ASX 200 in Australia closed down 1.34% at 6923. The home prices in Australia rose for the seventh straight month of price growth. While the Chinese Manufacturing PMI for January came in at 51.1 below the 51.5 previous reading.

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Nikkei 225 at Two Month Lows

The Nikkei 225 in Tokyo ended 1.01% lower at 26370. The Japan Manufacturing PMI came in at 48.3 well below the forecasts of 49.3 for January. Global growth concerns weigh on Nikkei, while the technical outlook today has turned neutral.

The Nikkei tested today the 100-day moving average and in early session breached below but after the PBOC intervention some buying managed to drive the price above the 100-day moving average and finally to settle above the critical support. The recent correction in Nikkei has cancelled the bullish momentum and now bulls need a break above the 50-day moving average in order to regain control of the trend.

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