World shares bounce back after bloodletting on Wall Street
By ELAINE KURTENBACH
AP Business Writer
BANGKOK (AP) - Shares in Europe and Asia bounced back Monday from last week's retreat, with mainland Chinese indexes gaining more than 3% as data showed progress in restoring factory output after weeks of disruptions from the viral outbreak.
Stocks have been swooning as investors fret the coronavirus outbreak will derail the global economy. But in those declines, some see opportunities to buy.
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Britain's FTSE 100 jumped 1.4% to 6,672.05 and the CAC 40 in Paris added 0.8% to 5,353.45. Germany's DAX edged 0.3% higher to 11,918.30.
U.S. futures saw a moderate recovery, with the contract for the Dow Jones Industrial Average rising 0.8% to 25,574.00 while the future for the S&P 500 added 0.5% to 2,965.60.
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The virus outbreak that began in central China has rattled markets as authorities shut down industrial centers, emptying shops and severely crimping travel all over the world. Companies are warning investors that their finances will take a hit because of disruptions to supply chains and sales. Governments are taking increasingly drastic measures as they scramble to contain the virus.
The rout has knocked every major index into what market watchers call a “correction,” or a fall of 10% or more from a peak. The last time that occurred was in late 2018, as a tariff war with China was escalating. Market watchers have said for months that stocks were overpriced and long overdue for another pullback.
Stocks sank Friday on Wall Street, capping the market's worst week since October 2008. The Dow fell 1.4% to 25,409.36. The S&P 500 slid 0.8% to 2,954.22, while the Nasdaq rose 0.1%, to 8,567.37. The Russell 2000 index of smaller company stocks lost 1.4%, to 1,476.43.
The market's losses moderated Friday after the Federal Reserve released a statement saying it stood ready to help the economy if needed. Investors increasingly expect the Fed to cut rates at its next policy meeting in mid-March.
Bank of Japan Gov. Haruhiko Kuroda likewise issued a statement Monday, after an early plunge in share prices, saying the central bank “will closely monitor future developments, and will strive to provide ample liquidity and ensure stability in financial markets through appropriate market operations and asset purchases."
That appeared to help the Nikkei 225 index recover from early losses. It gained 1% to 21,344.08, while the Shanghai Composite index rose 3.2% to 2,970.93. The benchmark for the smaller exchange, in Shenzhen, jumped 3.8%, while South Korea's Kospi climbed 0.8% to 2,002.51. The Hang Seng in Hong Kong climbed 0.6% to 26,291.68, while India's Sensex gave up early gains, losing 0.4% to 38,159.11.
Shares fell in Australia, where the S&P ASX/200 lost 0.8% to 6,391.50 after authorities confirmed the country's first case of domestic transmission of the virus. Investors there are watching for a decision on interest rates on Tuesday. Shares also fell in Taiwan and in most of Southeast Asia.
Bond prices have been soaring as investors seek safety, pushing yields to record lows. On Monday, the yield on the 10-year Treasury note, a benchmark for home mortgages and many other loans, was at a record low 1.09%, down from 1.14% Friday and 1.30% late Thursday.
The damage from last week's relentless selling of shares was eye-popping: The Dow Jones Industrial Average fell 3,583 points, or 12.4%. In a sign of the severity of the concern about the possible economic blow, the price of oil sank 16%.
The latest losses wiped out the S&P 500's gains going back to October. The benchmark index is still up 6.1% over the past 12 months, not including dividends. Its weekly loss of 11.5% was the biggest since an 18.2% drop in the week ending October 10, 2008.
Crude oil prices rebounded Monday. U.S. benchmark crude gained 96 cents to $45.72 per barrel in electronic trading on the New York Mercantile Exchange. It sank 4.9% on Friday over worries that global travel and shipping will be severely crimped, hurting demand for energy. The price of benchmark U.S. crude fell 15% last week.
Brent crude, the international standard, jumped $1.25 to $50.92 per barrel.
The latest data showed China’s manufacturing plunged in February as anti-virus controls shut down much of the world’s second-largest economy. China is still the hardest hit country and has most of the nearly 89,000 cases worldwide and related deaths. Its spread far beyond China has caused panic, dashing hopes for containment as nearly 60 nations representing every continent, except Antarctica, confirmed cases.
A monthly purchasing managers’ index released Monday by Caixin magazine fell to 40.3 from January’s 51.1 on a 100-point scale on which numbers below 50 show activity contracting. A separate PMI released Saturday by the National Bureau of Statistics and the China Federation of Logistics & Purchasing fell to 35.7 from January’s 50.
Despite the plunge, business confidence rose to a five-year high after the ruling Communist Party launched efforts to revive industry with tax cuts and other aid, Caixin said.
“Manufacturers were confident that output would rise over the next year,” the magazine said in a statement.
Julian Evans-Pritchard, of Capital Economics, said the data point to a major hit to jobs that could take time to reverse, and the increasing number of cases in other countries could stunt demand for China's exports.
“The only silver lining is that firms are the most convinced in years that future output will rebound," Evans-Pritchard said. But he added, “The likelihood of a quick V-shaped recovery in the coming months is falling fast."
In other trading, gold, another safe haven for investors, jumped $44.30 to $1,611.00 per ounce, silver picked up 50 cents to $16.96 per ounce and copper fell 3 cents to $2.55 per pound.
The dollar fell to 107.74 Japanese yen from 108.07 yen on Friday. The euro strengthened to $1.1087 from $1.1027.
AP Business Writer Joe McDonald contributed.
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