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Central bank boost sees Chinese stocks recover coronavirus losses

Edmund Heaphy
·Finance and news reporter
·2-min read
An investor looks at a screen showing stock market movements at a securities company in Hangzhou in China's eastern Zhejiang province on February 3, 2020. - Chinese stocks crashed on February 3 with some major shares quickly falling by the maximum daily limit as the country's investors got their first chance in more than a week to react to the spiralling coronavirus outbreak. (Photo by STR / AFP) / China OUT (Photo by STR/AFP via Getty Images)
An investor looks at a screen showing stock market movements in China earlier this month. Photo: STR/AFP via Getty Images

Chinese stocks on Monday rebounded after China’s central bank took a series of steps to boost the country’s economy, helping them erase February’s record coronavirus-related sell-off.

The People’s Bank of China cut one of its key interest rates, injected 200bn yuan (£22bn, $28.6bn) into the economy, and made 100bn (£10.9bn) yuan worth of short-term securities purchases.

The SSE Composite Index (^SSEC) climbed by more than 2% in Shanghai, as did the CSI 300 Index (000300.SS). The blue-chip SSE 50 (^SSE50) was up by around 1.9% at market close.

The gains mean that Chinese stocks have now recovered from their record 3 February losses, when the country’s markets reopened after the Lunar New Year to coronavirus panic.

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Stocks in Japan fell, meanwhile, after official data showed that the country’s economy shrunk by 1.6% in the final quarter of 2019, the sharpest contraction since 2014.

Experts warned that the country could fall into recession, while Bank of Japan governor Haruhiko Kuroda hinted that his bank could take stimulus measures if coronavirus dented the Japanese economy further.

Analysts pointed to the impact of trade tensions, a sales tax-related slowdown in consumer spending, and recent typhoons in Japan.

Stocks in Europe were more muted, but made small gains. The FTSE 100 (^FTSE) was up by more than 0.2% in London. Germany’s DAX (^GDAXI) was up similarly, while France’s CAC 40 (^FCHI) was up by less than 0.1%.

“European shares were a little indecisive at the start of play following a mixed bag overnight in Asia, but are leaning higher with stimulus from China helping to lift the mood,” said Neil Wilson, the chief markets analyst at Markets.com.

The People's Bank of China trimmed its one-year medium-term lending rate to 3.15% from 3.25%, and analysts expect the bank to take further measures to boost the country’s economy.

“Shares in Hong Kong and Shanghai advanced as China cut a key medium-term interest rate, while Tokyo shares slipped on growth concerns,” Wilson said.

READ MORE: Covid-19 death toll in China rises by 105

“Markets are betting this will be only a part of a wider stimulus programme to offset the economic damage wrought by the Covid-19 coronavirus — the [People’s Bank of China] has already been injecting liquidity and there will no doubt be more to come.”

Chinese authorities reported another 2,000 cases of coronavirus over the past 24 hours, pushing the total to more than 70,000.

The virus has disrupted the Chinese economy by forcing the closure of factories and hampering global supply chains.