February 3, 2020 / 12:56 AM / 14 days ago

GLOBAL MARKETS-Asian shares set for rough ride on virus fears, eyes on China

(Adds MSCI ex-Japan and Nikkei, updates levels throughout)

* Asian stock markets : tmsnrt.rs/2zpUAr4

* Australian, NZ shares fall; oil slides, gold firm

* Coronavirus death toll in China rises to 350

* China cbank to inject $174 bln liquidity on Monday

* Economists lower growth forecasts for Chinese economy

By Swati Pandey

SYDNEY, Feb 3 (Reuters) - Asian markets are set for another bumpy ride on Monday on fears about the hit to world growth from the rapidly spreading coronavirus, with all eyes on China where trading resumes following the Lunar New Year break.

A total of 361 people have died in China from the new virus with the first death out of the mainland reported on Sunday in the Philippines.

Looking to head off any panic, China’s central bank plans to inject 1.2 trillion yuan ($173.8 billion) of liquidity into the markets via reverse repo operations on Monday.

Beijing also said it would help firms that produce vital goods resume work as soon as possible, state broadcaster CCTV reported.

Despite the measures, MSCI’s broadest index of Asia-Pacific shares outside Japan was 0.5% lower, on track for an eighth straight day of losses.

Japan’s Nikkei stumbled 1.5% and South Korea’s KOSPI index was off 1.4%. Australia’s benchmark index was down 0.7%, while New Zealand shares fell 1.8%.

“These initial interventions aim to boost confidence, but they are unlikely to be sufficient to curtail a sharp downturn in Q1,” Citi economists said in a note.

“As most employees won’t return to work until Feb. 9, the output losses are likely to be larger than expected, and incoming economic activity data will continue to prompt the authorities to take more actions in order to reduce the adverse impact of the Wuhan coronavirus on the economy.”

Chris Weston, a Sydney-based strategist at broker Pepperston, said “the big unknown” was how China’s financial markets respond to the show of force from the country’s central bank.

“The fact the China Securities Regulatory Commission (CSRC) has detailed they see the impact of the coronavirus as ‘short-lived’ is designed to instil confidence,” Weston said. “Whether the market feeds off this optimism is another thing given the spread of the virus is still in its exponential stage.”

On Friday, the Dow fell 2.1%, the S&P 500 declined 1.8% and the Nasdaq Composite dropped 1.6% as economists tempered their outlook for the world’s second-largest economy.

In a sign of a pause in the selloff elsewhere, E-Mini futures for the S&P500 added 0.2% on Monday.

Analysts expect travel curbs and supply chain disruptions to crimp Chinese growth, with a potential domino effect on other economies.

Citi revised its full-year forecast for China’s GDP growth to 5.5% in 2020 from 5.8%. It also cut first-quarter growth expectations to 4.8%, compared with 6% in the fourth quarter of 2019.

JPMorgan shaved its forecast for global growth by 0.3 percentage points for this quarter.

Data out of the United States and Europe on Friday also pointed to economic weakness, while a mixed batch of corporate earnings added to the gloom.

In currencies, the safe-haven Japanese yen held near a 3-1/2 week high against the dollar at 108.41 after adding about 1.5% in the last two weeks.

The risk sensitive Australian dollar, which is often traded as a liquid proxy for the Chinese yuan, tumbled 2% last week to hit a four-month trough of $0.6683. It was last up 0.1% at 0.6694.

The dollar index, which measures the greenback against a basket of major currencies, was a shade higher at 97.439.

Gold, which posted its best month in five in January, eased to $1,588.72, while yields on U.S. debt lingered near five-month lows as the United States, Japan and other countries tightened travel curbs to China.

Oil futures skidded on concerns the coronavirus outbreak would hit China’s oil demand. Brent crude slid $1.06 to $55.56 a barrel, the lowest since January 2019. U.S. crude slipped 84 cents to $50.72.

Editing by Sam Holmes and Richard Pullin

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