SYDNEY (Reuters) – Asian shares reversed earlier losses on Monday and moved back toward a three-week top as Chinese efforts to cushion the blow from a coronavirus outbreak cheered investors, although Japanese stocks faltered amid growing recession risks.

Trading is expected to be light as U.S. stocks and bond markets will be shut on Monday for a public holiday.

MSCI’s broadest index of Asia-Pacific shares outside Japan was a tad firmer at 557.30, not far from last week’s peak of 558.30, which was the highest since late January.

The gains were helped largely by Chinese shares with the blue-chip index adding 0.4% after the country’s central bank lowered one of its key interest rates and injected more liquidity into the system.

Also whetting risk appetite was an announcement by China’s Finance Minister on Sunday that Beijing would roll out targeted and phased tax and fee cuts.

Fears about the jolt to the world economy from the coronavirus still lingered though as the number of reported new cases in China rose to 2,048 as on Sunday from 2,009 the previous day.

Restrictions were tightened further in Hubei on Sunday with most vehicles banned from the roads and companies told to stay shut until further notice.

China’s “containment measures suggest that activity is only likely to normalize by mid-March at best and more likely end Q1,” said Jefferies analyst Sean Darby.

“The question remains over the degree of stimulus to be required given the country’s fiscal position.”

Japan’s Nikkei stumbled 0.7% after the country’s economy shrank at the fastest pace in the December quarter since the second quarter of 2014.

The hit to the world’s third-largest economy comes amid fresh concerns about weakness in the current quarter, as the coronavirus damages output and tourism, stoking fears Japan may be on the cusp of a recession.

Trade-dependent Singapore downgraded its 2020 economic growth forecast due to the coronavirus, while China’s economy is also widely expected to take a sharp hit.

BULL RUN

Asia’s woes have yet to spread elsewhere, with Wall Street indexes scaling record highs.

E-Mini futures for the S&P500 were up 0.2% in Asian trading on Monday.

Talk of a U.S. middle class tax cut and a proposal to encourage everyday Americans to invest in the equities market boosted share market sentiment late last week, Betashares chief economist David Bassanese said.

Bassanese had misgivings about the plan, saying it reminded him of former U.S. President George Bush encouraging Americans to buy a home during a housing boom.

“It adds to my suspicion that this decade-long bull market could eventually end via a blow-off bubble, driven by central bank persistent low interest rate policy,” he said in a note.

Later in the week, flash manufacturing activity data for February are due for the Eurozone, the United Kingdom and the United States, which is likely to capture at least some of the early impact of the viral epidemic.

Action was relatively muted in the currency markets, with the dollar a tad firmer against the yen at 109.81. It was unchanged on the pound at $1.3047 and a tad weaker on the euro at $1.0837.

The risk-sensitive Aussie, which is also played as a liquid proxy for the Chinese yuan, ticked up to $0.6723.

That left the dollar index flat at 99.141.

In commodities, gold inched lower to $1,582.27 an ounce.

Oil futures slipped with Brent crude down 34 cents at $56.98 a barrel and U.S. crude off 12 cents at $51.93.

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