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Relief Rally Stalls in Asia as Investors Reassess Risk Factors

James Hyerczyk

The major Asia-Pacific stock indexes finished mostly lower on Wednesday after two sessions of sharp gains as investors dampened their optimism about the coronavirus while death tolls were still rising across the globe.

Mainland China’s new coronavirus cases doubled in 24 hours due to infected overseas travelers. Meanwhile in the U.S., New York State reported the number of COVID-19 hospitalizations seemed to be leveling off, while the death toll in the U.S. jumped by a record 1,800.

Wild price swings in the crude oil market also contributed to the lower Asia-Pacific trade.

On Wednesday, Japan’s Nikkei 225 Index settled at 19353.24, up 403.06 or +2.13%. Hong Kong’s Hang Seng Index finished at 23947.17, down 306.12 or -1.26% and South Korea’s KOSPI Index closed at 1807.14, down 16.46 or -0.90%.

China’s Shanghai Index settled at 2815.37, down 5.39 or -0.19% and Australia’s S&P/ASX 200 Index finished at 5206.90, down 45.40 or -0.86%.

Mixed Messages from Asia Continue

Some headlines are focusing on China’s recovery from the impact of the coronavirus, while others are following the tightening of restrictions as countries in the region continue to report new coronavirus cases and deaths.

China lifted travel restrictions in Wuhan, the virus epicenter in mainland China, effective from Wednesday, marking the end of a lockdown that began on January 23.

But Hong Kong extended its ban on public gatherings of more than four people until April 23. Additionally, Japanese Prime Minister Shinzo Abe declared Tuesday a state of emergency to combat coronavirus infections in major population centers. Meanwhile, Singapore also passed new laws that ban social gatherings.

Major Banks Sound the Risk Alarm

“There is reason to be cautious as this looked to be a relief rally ahead of next week’s start of Q1 earning season and before data reveals the depth of the virus impact,” said analysts at JPMorgan in a note.

“Data shows the recent move higher has been accompanied by short-covering and de-risking rather than active risk-taking on the long side,” the bank added.

Commonwealth Bank of Australia economist Joseph Capurso said in a note, “While the virus’ ‘curve is flattening’, the economic effects of the corona crisis will linger for years in our view,” Commonwealth Bank of Australia economist Joseph Capurso said in a note.

“Economies will take time to re-open, some businesses will not re-open, and unemployment will take years to return to levels reported at the end of 2019.”

This article was originally posted on FX Empire