Asia-Pacific Shares

Asian Shares Firm on Hopes of Global Recovery; Japanese Economy Contracted

The major Asia-Pacific stock indexes closed up on Monday but little changed as oil prices hit a five-week high as more countries re-opened their economies, stirring hopes the world was nearer to emerging from recession. The major markets were also supported by comments from U.S. Federal Reserve Chairman Jerome Powell who said the economy stateside may need a coronavirus vaccine to fully recover and a jump in U.S. stock index futures.

On Monday, Japan’s Nikkei 225 Index settled at 20133.73, up 96.26 or +0.48%. Hong Kong’s Hang Seng Index finished at 23918.15, up 120.68 or +0.51% and South Korea’s KOSPI Index closed at 1937.11, up 9.83 or +0.51%.

China’s Shanghai Index settled at 2875.42, up 6.96 or +0.24% and Australia’s S&P/ASX 200 Index finished at 5460.50, up 55.70 or +1.03%.

Growing Optimism as More Countries Lift Restrictions but Risks Remain

Summer weather is enticing much of the world to emerge from coronavirus lockdowns as centers of the outbreak from New York to Italy and Spain gradually lift restrictions that have kept millions cooped up for months. However, there remain risks from opening up too early.

“The economies of Europe and the U.S. likely bottomed out in April and are slowly starting to come back to life,” wrote Barclays economist Christian Keller in a note.

“However, incoming data from most economies highlight the depth of the contraction, raising risks of longer-term scarring that might undermine the recovery.”

Oil Prices Rise Ahead of June WTI Contract Expiry

Crude oil prices climbed by more than $1 a barrel on Monday, supported by output cuts and signs of a gradual recovery in demand amid easing coronavirus curbs, with U.S. oil showing no signs of last month’s contract expiry price rout that drove prices below $0.00 for the first time in history. Asian traders saw this as a good sign for the global economy because it indicates demand may be picking up.

Powell Sees Need for More Government Aid

Late Sunday (local time), Federal Reserve Chairman Jerome Powell took a cautious line in an interview saying a U.S. recovery may stretch deep into next year and a full comeback might depend on a coronavirus vaccine.

Powell also outlined the likely need for three to six more months of government financial help for firms and families. Talk of additional government stimulus also helped boost gold prices over 1% to their highest level since 2012.

Japanese Investors Show Little Reaction as Economy Enters Recession

Japan’s economy slipped into recession for the first time in 4-1/2 years in the last quarter, putting the nation on course for its deepest postwar slump as the coronavirus crisis ravages businesses and consumers.

Analysts polled by Reuters estimate Japan’s economy will shrink an annualized 22.0% in the current quarter, which would be a record decline, with pressure on output intensifying after Prime Minister Shinzo Abe in April declared a nationwide state of emergency amid the widening pandemic.

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James Hyerczyk

James A. Hyerczyk has worked as a fundamental and technical financial market analyst since 1982. His technical work features the pattern, price and time analysis techniques of W.D. Gann.