Investors will be watching Japanese stocks today, amid renewed coronavirus fears, after the country reported weak economic growth data for the fourth quarter. More economic releases are due later in the day.
Context: Japan’s shares closed lower on Friday and opened on a downbeat note today. The economic impact of the coronavirus pushed demand higher for the “safe-haven” yen. Japan has reported various infections from the coronavirus and is one of the worst affected countries after mainland China.
Details: The Japanese Nikkei closed around 0.6% lower in Friday’s trading, as the country reported its first death from the flu-like virus on the previous day. The index also opened lower in today’s trading session, following data showing that the country’s economy had contracted the most since the second quarter of 2014. Japan’s GDP fell 1.6% in the fourth quarter, following a revised 0.1% growth in the third quarter.
In its latest update, China's health commission reported 105 additional deaths and 2,048 new cases on Sunday, bringing the total case count to 70,548 globally. Analysts expect investors to stay away from Asian stocks for the time being and focus on the US stock market. Weakness in Japanese stocks will boost demand for the yen due to its “safe haven” status.
Shares of air transportation, iron & steel and metal products were the worst performers on the Tokyo Stock Exchange on Monday. The US dollar was trading at 109.77 yen, versus 109.72 yen in New York trading.
On Friday, Nissan Motor’s shares lost around 10%, reaching its lowest level in ten and a half years, after the company lowered its annual operating profit outlook by 43% due to a downturn in vehicle sales. Shares of SUMCO Corp and Toshiba Corp bucked the overall market weakness, posting a rise of around 7% and 2.5%, respectively.
Why it matters: Market sentiment was again dented by weaker-than-expected GDP data for the October to December quarter. After a weak performance by Japanese stocks in Friday’s session followed by a lower opening today and with US markets remaining closed for President’s Day, all eyes are on further economic releases scheduled for release today. Industrial production data is likely to provide some relief to investors.
What to watch: Japan’s industrial production is expected to rise 1.3% in December, after falling 1% in the previous month. Capacity utilization in Japan is projected to show 0.2% growth in December, after declining 0.3% in November.
Other Markets: US indices closed mixed on Friday, with the Dow falling 0.09%, the S&P 500 rising 0.18% and the Nasdaq gaining 0.20%.