TOKYO – Stock markets shed some gains Tuesday after the Group of Seven countries held off announcing new measures to help the global economy cope with the disruption from the coronavirus outbreak.
Traders had been keenly awaiting the outcome of a conference call of central bankers and finance ministers from the G-7 most powerful developed nations, with some hoping for a wide-ranging package of economic support.
Instead, the G-7 finance ministers and central bankers reaffirmed their commitment to use “all appropriate policy tools to achieve strong, sustainable growth and safeguard against downside risks.”
The finance ministers said they are “ready to take actions, including fiscal measures where appropriate, to aid in the response to the virus and support the economy during this phase.”
Following the announcement, stocks gave up some gains.
In Europe, the FTSE 100 index of leading British shares was up 1.5% at 6,754 while Germany's DAX rose 1.8% to 12,065. The CAC-40 in France was 1.2% higher at 5,398. Wall Street was set for a flat opening, a day after the Dow Jones industrial spiked a record 1,293.96 points, or 5.1%. Dow futures and the broader S&P 500 futures were both 0.1% higher.
Despite the lack of action now, there's a growing view among investors that policimakers will agree on measures to help counter what is one of the greatest threats to the global economy since the financial crisis a decade ago. The Organization of Economic Cooperation and Development on Monday slashed its global growth forecast — to 2.4% for this year from 2.9% —and warned that the economic fallout from the virus' spread could be even worse.
A key questions for policymakers on the call, which was hosted by U.S. Treasury Secretary Steve Mnuchin and Federal Reserve Chairman Jay Powell, was whether any action they take can do much to improve business sentiment or unclog supply chains that have been snarled by the virus outbreak, which began in China and spread to dozens of countries. About 3,100 people have died and more than 90,000 sickened.
“What the G-7 needs to deliver is not the blunt instrument of lower rates — these are already at record lows," said Michael Hewson, chief markets analyst at CMC Markets. “What is needed in these difficult times is ample liquidity to ease credit conditions. Above all else, banks will need to be sympathetic on companies that are encountering cash flow problems, allowing them some forbearance or extensions to credit terms.”
Earlier, in Asia, stocks largely rebounded, though Japan's Nikkei 225 lost 1.2% to finish at 21,082.73. Australia's S&P/ASX 200 rose 0.7% to 6,435.70 after the Reserve Bank of Australia cut its key interest rate to a record low 0.5%. South Korea's Kospi rose 0.6% to 2,014.15. Hong Kong's Hang Seng fell less than 0.1% to 26,284.82, while the Shanghai Composite advanced 0.7% to 2,992.90.
The mood shifted in Tokyo by midday, as traders wondered what more the Bank of Japan could do to counter the slowdown. After all, the BOJ's policy rate has stood at minus 0.1% for several years and the central bank has been purchasing tens of billions of yen (billions of dollars) worth of government bonds and other assets to help keep credit cheap and stave off deflation as the population in the world's No. 3 economy ages and shrinks.
Oil prices are tracking stocks during this crisis as traders assess the impact of the outbreak on demand. Last week, oil prices plunged as fear gripped the market. Hopes of stimulus has prompted a rebound. Benchmark U.S. crude rose 98 cents to $47.73 a barrel in electronic trading on the New York Mercantile Exchange while Brent crude, the international standard, gained 93 cents to $52.83.
In the currency markets, the euro was down 0.1% at $1.1116 while the dollar fell 0.5% to 107.72 yen.