Japan Nikkei bounces on bargain hunting

Headline indices of the Japan share market advanced on Wednesday, 04 March 2020, as some investors sought out bargains which helped to recoup initial losses that came after Wall Street fell overnight despite a U.S. Federal Reserve emergency rate cut to curb the economic fallout from the coronavirus epidemic. However, market gains were limited as concerns persist about possible economic fallout due to the spread of the pneumonia-causing virus that originated in China. Around late afternoon, the 225-issue Nikkei Stock Average added 78.68 points, or 0.37%, to 21,161.41, while the broader Topix index of all First Section issues on the Tokyo Stock Exchange rose 2.68 points, or 0.18%, at 1,507.80.

Total 17 out of 33 industry categories of Topix index lost ground, with Banks, Insurance, Marine Transportation, Transportation Equipment, Fishery, Agriculture & Forestry, and Retail Trade issues being notable losers, while Real Estate, Information & Communication, Iron & Steel, and Wholesale Trade issues were notable gainers.

Investors sought out bargains after the market's recent decline amid expectations that major central banks will follow the Fed in cutting interest rates to combat the impact of the virus lifted real estate issues.

The Federal Reserve announced a surprise decision to cut interest rates by 50 basis points to 1 to 1-1/4%. In an accompanying statement, the Fed said the fundamentals of the U.S. economy remain strong but noted the coronavirus poses evolving risks to economic activity. The central bank added that it is closely monitoring developments and their implications for the economic outlook and will use its tools and act as appropriate to support the economy.

Also, Fed Chair Jerome Powell and Treasury Secretary Steven Mnuchin led a conference call with the G7 Finance Ministers and Central Bank Governors to discuss the coronavirus. In the statement released following the call, the G7 finance chiefs reaffirmed their commitment to use "all appropriate policy tools to achieve strong, sustainable growth and safeguard against downside risks."

The magnitude of the COVID-19 outbreak and its effect on the economy and supply chains remain the biggest questions for investors. The Paris-based Organization for Economic Cooperation and Development on Monday forecast that the global economy would grow by 2.4% in its best case scenario, compared with 2.9% expansion projected before the viral outbreak. The OECD urged governments to act swiftly and forcefully to boost the world economy.

CURRENCY NEWS: The Japanese yen, often seen as a save-haven in times of economic uncertainty, traded at 107.41 per dollar after touching an earlier high of 106.84.

Powered by Capital Market - Live News