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Mainland Asia Shares Down; Japan, Australia Buck the Trend to Close Higher

James Hyerczyk

The major Asia Pacific stock indexes settled mixed on Friday with mainland Asia shares lower, and the islands – Japan and Australia higher. The move reflects the spreading of the ongoing coronavirus outbreak, which is centralized in China, on investor sentiment. The price action suggests investors shrugged off the strong performances on Wall Street.

On Friday, Japan’s Nikkei 225 Index settled at 23205.18, up 227.43 or +0.99% and South Korea’s KOSPI Index finished at 2119.01, down 28.99 or 1.35%. At 08:11 GMT, Hong Kong’s Hang Seng Index is trading at 26335.06, down 114.07 or -0.43%.

Australia’s S&P/ASX 200 Index settled at 7017.20, up 8.80 or +0.13%. The stock market in China is closed until February 3.

All Asian markets were headed for weekly losses as the virus continued to dampen risk appetite in the region.

Coronavirus Update

Asian stock markets extended losses on Friday after the World Health Organization (WHO) declared the coronavirus outbreak a global emergency.

On Thursday, the WHO director-general said the greatest concern was the virus’ potential spread to countries with weaker healthcare systems, compounded by cases of person-to-person transfer of the virus outside China.

Meanwhile, economists have signaled the impact of the new virus could be worse than that of the Severe Respiratory Syndrome (SARS) epidemic in 2002-2003, which took 800 lives and cost the global economy and estimated $33 billion.

The death toll from the virus crossed the 200-mark in China with confirmed cases of infection reported in at least 22 other countries and regions.

China Manufacturing Activity in Line with Expectations

Growth in China’s factory activity faltered in January, an official survey showed, as export orders fell and an outbreak of a new virus added to risks facing the world’s second-largest economy, Reuters reported.

The Purchasing Managers’ Index (PMI) fell to 50.0 in January from 50.2 in December, China’s National Bureau of Statistics (NBS) said on Friday. The reading was in line with analysts’ forecasts and hit the neutral 50-point mark that separates growth from contraction on a monthly basis.

While the PMI showed activity in some parts of the sector holding up, economists are doubtful the survey provides a meaningful read on the economy given recent developments with the coronavirus and distortions from the Lunar New Year break.

“I would disregard today’s release,” said Raymond Yeung, Chief Economist for Greater China at ANZ, in an email to Reuters.

“The figure certainly overrates the economic outlook as it does not reflect the interruption due to the outbreak,” he said.

Japan’s Fourth-Quarter Factory Output Falls at Fastest Pace on Record

Japan’s factory output fell at the fastest pace on record in October-December amid sluggish demand at home and abroad, reinforcing views the economy likely contracted in the fourth quarter.

Factory output fell 4.0% in Q4, the fastest pace of decline since comparable data began in 2013, data from the Ministry of Economy, Trade and Industry showed on Friday.

Separate data showed retail sales fell for a third straight month in December, adding to worries about consumer spending after a sales tax increase in October.

Retail Sales – a key gauge of private consumption – fell 2.6% in December from a year earlier, down for a third straight month and compared with a 1.8% decline expected by economists.

This article was originally posted on FX Empire

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