China economy, Caixin PMI, coronavirus in focus

China economy, Caixin PMI, coronavirus in focus

Stocks in Asia were set to decline on Monday as official Chinese manufacturing data released over the weekend came in much worse than expected.

Futures pointed to a lower open for Japanese stocks. The Nikkei futures contract in Chicago was at 21,030 while its counterpart in Osaka was at 20,550. That compared against the Nikkei 225’s last close at 21,142.96. Shares of Sharp will be watched following reports from Japanese media late last week that the firm is set to start making face masks amid a shortage caused by the coronavirus outbreak.

Meanwhile, stocks in Australia continued to decline on Monday in early trade, with the S&P/ASX 200 down more than 2% after tumbling through last week.

Factory activity in China plunged in February as the country dealt with the economic impact of the virus outbreak, according to data released by the National Bureau of Statistics on Saturday. The official Purchasing Managers’ Index (PMI) fell to 35.7 in February ⁠— the lowest level on record, according to Reuters — as compared to a reading of 50.0 in January. The 50-point level in PMI readings separates growth from contraction.

Analysts in a Reuters poll had expected the February PMI to come in at 46.0.

“China’s February manufacturing PMI at 35.7 is comparable to the sort of outcomes seen during the financial crisis,” Richard Yetsenga, chief economist at Australia and New Zealand Banking Group, wrote in a note dated Mar. 2. “While businesses are restarting operations in China, the vast majority are operating well below capacity, and many restrictions on the movement of people remain.”

Investors now await the release of a private survey of Chinese manufacturing activity in February. The Markit/Caixin manufacturing PMI is expected to be out at 09:45 a.m. HK/SIN on Monday.

Meanwhile, stock movements in Malaysia will also be watched on Monday following the shock appointment of a new prime minister after the country’s former premier Mahathir Mohamad unexpectedly resigned last week.

Markets have seen a global sell-off in recent days as investor concerns rose over the rapid spread of the coronavirus outside of China, where it was first reported. The sharp moves downward left seven major Asia-Pacific markets in correction territory by Friday’s market close, with their counterparts stateside and in Europe also seeing steep losses.

At least 85,000 cases of the coronavirus have been confirmed around the world so far, along with more than 2,900 virus-related deaths. Australia, Thailand and the U.S. reported over the weekend their first coronavirus-related deaths.

The U.S. dollar index, which tracks the greenback against a basket of its peers, was last at 97.937 after declining from levels around 99.6 last week.

The Japanese yen, often viewed as a safe-haven currency in times of economic uncertainty, traded at 107.54 per dollar after strengthening from levels above 110 last week. The Australian dollar changed hands at $0.6503 after dropping from levels above $0.6555 last week.

Here’s a look at what’s on tap in the trading day ahead:

Australia: Company gross operating profits for the fourth quarter at 8:30 a.m. HK/SINChina: Markit/Caixin manufacturing PMI for February at 9:45 a.m. HK/SIN

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