Markets Apr 01

Asia subdued after grim coronavirus forecast

Estimate that up to 240,000 Americans could die from Covid-19 a setback to market sentiment

Asia subdued after grim coronavirus forecast
Recession in the US and many other regional markets. Image: iStock

(ATF) Asian markets were subdued after US President Donald Trump warned of a painful two weeks ahead as the coronavirus infections count surged past 850,000 with American cases approaching 200,000. 

A White House projection that 100,000 to 240,000 Americans will die from Covid-19 is a further setback to market sentiment amid an expectation that investors are unlikely to start buying in a big way until the pandemic is brought under control across the world.

“We suspect that over the coming months there will be growing evidence that the pandemic has been brought under control in much of the world, including the US. And we think that this will set the stage for a more lasting recovery in global equity markets, even if the virus is not eliminated completed in some parts of the world,” Simona Gambarini said in a note for Capital Economics.

Stocks continue to be weak after globally registering their biggest quarterly drop since 2008, with the Nikkei 225 down 0.79%, the Hang Seng index off 0.68% and Korea’s Kospi index flat. Australia’s S&P ASX 200 was 3.64% higher on the back of gains by oil stocks as energy companies recover from a catastrophic fall triggered by the oil price war.

But Chinese stocks gained after a manufacturing index of small, private businesses showed an increasing number of firms are resuming work. But the index compiler said it did not mean conditions had normalized.

“This points to the stabilization of operating conditions, rather than recovery. Operating capacity has yet to return to full strength in many sectors,” said Bernard Aw, principal economist at IHS Markit.

“Despite gradual restoration, supply chains are still under pressure. While not as severe compared to February, delivery times continued to lengthen at a rate not usually seen since the global financial crisis.”

In the day ahead markets will assess Purchasing Managers Index (PMI) data from a host of European countries and from the United States, which will also release Institute for Supply Management (ISM) numbers as well as Automatic Data Processing (ADP) employment figures.

“Our technical readings show equity markets are oversold,” said Luca Paolini, Chief Strategist at

Pictet Asset Management. “But financial markets could experience renewed bouts of volatility in the coming weeks as the extent of economic damage from the pandemic becomes clear.”