Asian stocks stabilizes as Chinese shares move high

Asian stocks stabilized as Chinese shares moved higher on hopes of governmental steps amid the economic blow from a coronavirus outbreak, but risks remain as the illness continued to spread and the death toll neared 500.

Reuters reported that Asian stocks stabilized.  MSCI’s broadest index of Asia-Pacific shares outside Japan was up 0.6%.

Shares in China rose 1.66% while stocks in Hong Kong climbed 0.52%.

Oil prices bounced by around 1% on hopes for more output cuts from OPEC and its allies but sentiment remained weak on worries about a long-term dent in demand for energy and other commodities.

The onshore yuan was little changed versus the dollar, highlighting the cautious mood as investors monitor the impact of the virus.

Euro Stoxx 50 futures were down 0.19%, German DAX futures were down 0.04%, while FTSE futures were down 0.29% in a sign European equities are poised for a cautious start to trading.

China and other countries have imposed travel restrictions to try to contain a new virus that emerged in the central Chinese city of Wuhan late last year, slamming the breaks on manufacturing and tourism in the world’s second-largest economy.

Many investors argue that any slowdown will be temporary and that Chinese policy steps are reason to remain optimistic about the growth outlook, but so far public health officials have not found a way to stop the spread of the virus both inside and outside of China.

“We’re going to have a strong day in Asia, but whether this is the reversal of a downtrend remains to be seen,” said Michael McCarthy, chief market strategist at CMC Markets in Sydney.

“Oil investors remain pessimistic about demand disruptions, but equity investors, especially overseas, are discounting the impact of the virus.”

Australian shares rose 0.45%, buoyed by gains in the mining sector. Japan’s Nikkei stock index rose 1.42%, supported by shares of industrial equipment makers.

U.S. stock futures fell 0.12% in Asia on Wednesday. The S&P 500 rose 1.5% on Tuesday and the tech-heavy Nasdaq rose to a record high.

The People’s Bank of China (PBOC) is likely to lower its key lending rate – the loan prime rate – on Feb. 20, and cut banks’ reserve requirement ratios in the coming weeks, policy sources told Reuters.

The PBOC has already pumped hundreds of billions of dollars into the financial system this week to keep rates from rising and restore confidence. This helped Chinese stocks stabilize on Tuesday following a rout that wiped out around $700 billion in market capitalization on Monday when Chinese markets opened after an extended holiday.