1. Coronavirus triggers emergency measures around the world
The coronavirus outbreak spread more broadly around the world, causing more heavy selling in equity and commodity markets worldwide.
South Korea, the biggest hotspot outside China, reported another 571 cases, while Iran, which has been slow to impose travel and work restrictions on its population, reported another 143 cases.
The virus has also reached sub-Saharan Africa, with Nigeria confirming its first case. The northern Japanese island of Hokkaido declared a state of emergency, while quarantines and school closures spread across Germany. Neighboring Switzerland, meanwhile, has banned all public events with over 1,000 participants – meaning the cancellation of this year’s Geneva Auto Salon.
2. Panicked selling in global markets continues, then eases
The panic in global financial markets showed tentative signs of easing, but not before another hefty write-down of risk assets and mark-up of havens.
Asian stock markets fell sharply, while Europe’s bounced off intra-day lows but were still down by anything between 2.2% and 3.2% by midday in Europe, after what is now becoming a regular routine of profit warnings from companies.
Brent crude hit a three-year low before bouncing back above $50 a barrel, after profit warnings from two of Europe’s biggest airline groups that, like many others this week, were all the more concerning because of their vagueness.
The 10-year U.S. Treasury yield fell to a new record low of 1.17% before returning to 1.19%. Gold futures gave up some of their recent stellar gains.
3. U.S. stocks set for lower opening, but off overnight lows
U.S. stock markets are set to extend losses at opening, although with many indicators suggesting that markets are heavily oversold in the short term, some will be hoping for a bounce going into the weekend.
By 6:30 AM ET (1130 GMT), the Dow futures contract was down 217 points or 0.9% at 25,334 points. The S&P 500 futures contract and the Nasdaq 100 contract were both down 0.8%.
One stock likely to be in focus in early trade is Cisco Systems (NASDAQ:CSCO), which – according to The Wall Street Journal – is planning a new round of lay-offs ‘because of global economic uncertainty.’
On the data front, there will be data on personal consumer expenditures and personal income at 8:30 AM ET (1330 GMT).
4. Bundesbank sees virus hitting German economy
The German economy is likely to grow more slowly than forecast this year due to the coronavirus, Bundesbank President Jens Weidmann warned.
“If it comes to an epidemic in Germany then…direct economic effects are to be expected,” Weidmann told a press conference. However, he said there was no immediate need for the ECB to act.
Markets are unconvinced: they’re pricing in another 10 basis point cut in the ECB’s deposit rate after weaker-than-expected inflation numbers from France and Italy this morning. Germany, meanwhile, recorded a surprise drop of 10,000 in seasonally-adjusted jobless earlier Friday.
5. Lira, ruble weaken as Turkey and Russia square off in Syria
The Turkish and Russian currencies weakened after the two countries came closer to direct conflict in Syria.
The ruble fell as low as 67.23 to the dollar, its lowest since January 2019, while the lira weakened to 6.26 to the dollar, a nine-month low. Both have in any case been caught up in the general rout of higher-yielding currencies since the coronavirus oubreak exploded.
Over 30 Turkish soldiers died in an airstrike in the Idlib region on Thursday that reports attributed to the Russian air force, which commands the skies over Syria. Russia is helping President Bashir al Assad’s forces to crush the last remaining pocket of resistance to his rule.
1. Coronavirus in U.S. makes a big step
The U.S. Center for Disease Control and Prevention confirmed the first case of the coronavirus on U.S. soil with no links to China, raising fears that the ‘community spread’ of which the CDC warned earlier in the week will soon become reality.
On Wednesday evening, President Donald Trump had put Vice-President Mike Pence in charge of coordinating the U.S.’s response to the outbreak. Trump said the risk to the American people “remains very low.”
Elsewhere, Japan ordered its schools to shut from March 2 to stop the outbreak spreading, while Saudi Arabia said it would refuse to accept pilgrims travelling to religious sites such as Mecca and Medina.
The number of confirmed cases in South Korea continued to rise sharply, while a woman in Japan tested positive for the virus for the second time, proving that re-infection is possible. In China, a leading virologist who predicted the outbreak would be contained by mid-February pushed back his timeline for that to April.
2. Global stocks retreat again
Global stocks and bond yields fell, with the exception of China, amid increasing signs that the viral outbreak is abating there. China announced fewer new cases of Covid-19 on Thursday than South Korea.
European stocks fell as much as 2.5%, spooked by the news out of the U.S. and by the disease’s spread through Europe. Airlines and travel companies were again particularly hard hit, with the continent’s discount flyers all down over 21% in the last week.
By 6:35 AM ET, the benchmark Stoxx 600 was down 2.5%, while the U.K. FTSE 100 was down 2.1%.
3. U.S. to open in risk-off mode; Microsoft's sales warning hurts mood
Risk aversion is set to be in full flood again when U.S. markets open, as participants reprice the threat to corporate earnings. Microsoft (NASDAQ:MSFT) joined Apple (NASDAQ:AAPL) last night in saying it would miss its first-quarter sales target, without giving a new one.
By 6:35 AM ET, the Dow 30 futures contract was down 265 points, or 1.0%, while the S&P 500 futures contract was down 1.0% and the Nasdaq 100 contract down 0.9%.
U.S. government bond yields have collapsed this week as appetite for haven assets has soared. The Fed-sensitive 2-year bond yield has fallen to 1.11%, implying at least two 25 basis point cuts from the Federal Reserve over the next couple of years. The 10-year Treasury yield meanwhile hit a new record low of 1.29% overnight.
Gold futures are firm above $1,650 an ounce, while U.S. crude futures have fallen over 2% to their lowest since the end of 2018 at $47.59 a barrel. Brent was also down over 2% at $51.59.
4. AB Inbev hit hard by virus in China
The world’s biggest brewer has the sector’s biggest problems. Anheuser Busch Inbev (BR:ABI) stock fell 9.3% after reporting extremely weak figures for the fourth quarter of 2019, blaming commodity and foreign exchange factors for exaggerating the slowing trend in global beer consumption.
Net profit fell 75% from a year ago and revenue fell 1.3%, despite a 1.1% rise in sales volume, suggesting that the company’s efforts at premiumization – squeezing more value out of a stable of brands that includes Budweiser and Michelob – are struggling to make headway.
Budweiser APAC, which was spun out of the parent company last year, issued a particularly stark warning that the Covid-19 outbreak had caused sales in China to fall by $285 million in the first two month of the year, as restaurants, bars and other nightlife venues suffered. That will translate into a $170 million hit to EBITDA over those months, it added.
It’s a busy day for corporate earnings, with Workday, Autodesk, EOG Resources, Occidental and Monster Beverage all set to report.
5. U.S. GDP revision, durable goods and jobless claims all due
The U.S. will update its estimate for gross domestic product in the fourth quarter of last year at 8:30 AM ET, but those backward-looking numbers are likely to be overshadowed by durable goods orders for January and last week’s initial jobless claims, both of which are due at the same time.
Data released earlier in Europe showed no major hit to European consumer or business confidence so far, the European Commission’s economic sentiment index rising more strongly than expected to 103.5, the highest since June.
The euro has rebounded against the dollar over the last 24 hours. By 6:30 AM, it was up 0.5% at $1.0938.
1. Europe braces for pandemic
Europe braced for the further spread of the Covid-19 coronavirus, as Italy reported 19 new cases in the region of Lombardy and a further death that took the national toll to 11. France announced the first death of a patient with no travel links to China, while Croatia, Austria and Switzerland confirmed their first new cases.
In Spain, the capital Madrid and second city Barcelona have both reported their first cases, while over 700 tourists remain in lockdown in a hotel in Tenerife in the Canary Islands.
Europe’s benchmark Stoxx 600 fell 1.1% to its lowest in nearly four months, after food and drink giants Diageo (LON:DGE) and Danone (PA:DANO) and miner Rio Tinto (LON:RIO) all warned of virus impacts to this year’s sales.
The German 10-Year government bond yield fell as low at -0.53% as markets priced in another 10 basis point cut in the ECB’s deposit rate. The euro held steady at $1.0878.
2. Hong Kong's reflation budget falls flat; South Korea's virus spreads
Hong Kong unveiled a highly stimulative budget for the coming year, which included direct handouts of over $1,200 to every adult permanent resident. The stimulus aimed at stabilizing an economy in free fall due to the double-whammy of long-running pro-democracy protests and virus containment measures. However, the budget failed to reassure the city’s stock market, which fell another 0.7% to a three-week low.
Mainland Chinese markets also fell, with the tech-heavy SZSE Component falling 3.0%, even though China reported its lowest number of new coronavirus cases in three weeks.
In South Korea, the biggest virus hotspot outside China, the benchmark KOSPI index fell 1.3% to its lowest since early December after the country reported nearly 300 new cases, including a U.S. soldier stationed at a U.S. army base in the country. Kuwait and Iran both reported further significant increases in their death tolls.
3. U.S. markets set to open mixed
U.S. markets are set to open mixed, with major stock indices reversing overnight losses and edging higher, while bonds soften. Gold continues to receive heavy inflows.
By 6:25 AM ET, the Dow 30 futures contract was up 13 points or 0.1%, while the S&P 500 futures contract was up 0.2% and the Nasdaq 100 contract was up 0.3%.
There will be close scrutiny of Booking's (NASDAQ:BKNG) earnings after the closing bell, given the travel sector’s particular exposure to the virus. Retailers Lowe’s (NYSE:LOW) and TJX (NYSE:TJX) are also due to report.
Virgin Galactic (NYSE:SPCE) will also be in focus after falling 6.4% in after-hours trading on the back of an earnings report that reminded the market how far it still is from commercial viability. By contrast, Salesforce's (NYSE:CRM) quarterly earnings came in well ahead of expectations late on Tuesday.
The dollar hit new highs against commodity currencies such as the Russian ruble, Aussie and kiwi dollars, as well as the Turkish lira, but the dollar index that measures it against a basket of developed economy peers was broadly stable at 99.013.
4. Oil tumbles below $50/barrel
U.S. crude futures fell below $50 a barrel, hitting an intraday low of $49.01 that was their lowest mark since early January last year. By 6:25 AM ET, they had rebounded slightly to $49.49 a barrel, down 0.9% on the day.
The global benchmark futures contract Brent fell 1.2% to $53.59 a barrel.
Prices have received little support from American Petroleum Institute data showing that U.S. crude oil inventories rose by less than expected last week. The API reported a stock build of 1.2 million barrels rather than the 2.0 million-barrel rise expected. The U.S. government releases official inventories data at 10:30 AM ET.
5. Disney CEO Iger to step down
After years of on-off succession speculation, Walt Disney (NYSE:DIS) announced that Robert Iger will step down with immediate effect as chief executive officer.
Iger will stay on as executive chairman until the end of next year, when his contract is due to expire. The CEO’s duties will be taken up by Bob Chapek, who has been head of the company’s theme parks division since 2015.
Chapek has been with the company for some three decades, a factor that analysts said counted heavily in him beating streaming head Kevin Mayer to the CEO’s position.
The news comes at a time when Disney stock is taking a pummelling from the coronavirus outbreak, which has put big question marks over the performance of the theme parks division this year. The stock fell another 1.8% in after-hours trading to its lowest since April 2019.
1. Turnaround Tuesday?
U.S. stock futures pointed to a flat open on Wall Street by 7:18 AM ET (1218 GMT), with Dow futures reversing a more than 100 point gain. The Dow shed more than 1,000 points by the close on Monday, its third largest points decline ever amid a global stock selloff triggered by fears over the damage a pandemic would do to the global economy.
The S&P 500 ended down 3.3%, also the worst drop in two years. With Monday’s declines, the S&P 500 and the Dow both wiped out their gains for the year to date.
A Wall Street Journal report on a possible vaccine was cited as helping sentiment, but European markets fell back into the red, surrendering early gains as the virus spread to the south of Italy and Spanish authorities tested hundreds of tourists in a Canary Islands hotel after a case was identified.
2. 80,000 people globally hit by virus
The coronavirus outbreak has now affected 80,000 people globally and the death toll in Italy climbed to seven on Monday with 229 cases reported in what is the largest cluster of virus cases in Europe.
China reported a rise in new cases in Hubei province, the epicentre of the outbreak, even though the rest of the country saw a fourth-straight day of declines.
South Korea, which has the most virus cases in Asia outside China, reported 60 new cases on Tuesday, increasing the total number of infected patients there to almost 900.
The WSJ reported that drugmaker Moderna (NASDAQ:MRNA) has shipped the first batch of its rapidly developed coronavirus vaccine to U.S. government researchers to be tested in humans. Shares in the company soared 15.6% to $21.33 in after-hours trading on Monday.
Separately, China is planning to release results from clinical trials of a Gilead Sciences (NASDAQ:GILD) drug in April.
3. Fed rate cut bets rise
Futures for the Federal Reserve funds rate have risen in recent days and are now pricing in a 50-50 chance of a quarter-point rate cut as soon as April. In all, they imply more than 50 basis points of reductions by year end.
Ten-year U.S. Treasury yields reached lows of 1.36% on Tuesday, within touching distance of the record lows of 1.32% set in 2016 in the wake of the Brexit referendum.
Cleveland Fed President Loretta Mester described the outbreak as a "big risk" on Monday.
"At this point, it is difficult to assess the magnitude of the economic effects, but this new source of uncertainty is something I will be carefully monitoring," she said.
But Mester pushed back against the notion that the Fed would be driven to act in response to jittery financial markets.
"I just caution that you don't want to over-react to volatility in the markets if you're a monetary policymaker," she said.
4. Corporate cost of virus crisis mounts
Overnight Mastercard (NYSE:MA) warned that its net revenue in the first quarter will take a hit of between 2% and 3% over its previous forecast if the coronavirus outbreak persists through the quarter.
Meanwhile, United Airlines (NASDAQ:UAL) withdrew its full-year 2020 guidance, citing heightened uncertainty over how the duration and spread the virus to other regions could impact overall air travel demand.
Among U.S. airlines, United is the most at risk for lower passenger traffic from virus fears due to its greater international exposure, CFRA analyst Colin Scarola said in a note to investors.
5. OPEC says it still has ideas to rebalance oil markets
The Organization of Petroleum Exporting Countries and allies such as Russia are still working well together and still have options to try to rebalance global crude markets, Saudi Energy Minister Prince Abdulaziz bin Salman said Tuesday.
Oil ministers of OPEC and non-OPEC countries, a group known as OPEC+, will meet next week in Vienna to assess their global cuts and output policy.
“We are communicating with each other at every opportunity,” he said. “The OPEC secretary-general is attending this conference, and we just had a chat. We did not run out of ideas.”
The comments came amid speculation over whether the group will agree to cut oil production further. Oil prices have slumped amid concerns over a global supply glut and worries over the impact of coronavirus on the global demand outlook.
--Reuters contributed to this report
1. Coronavirus cases outside China surge
The coronavirus outbreak outside of China has gathered pace, with a surge of cases in Italy, South Korea and Iran over the weekend, which sparked renewed fears over a hit to global economic growth.
Authorities in Italy have imposed a quarantine in the north of the country to try to halt what is the largest outbreak of the virus outside Asia, fueling concerns about the potential for the virus to spread deeper into Europe and cause economic disruption there.
There is lots of bad news on the coronavirus front with the total number of new cases still rising," AMP chief economist Shane Oliver wrote in a note.
"Of course, there is much uncertainty about the case data, new cases outside China still looks to be trending up and the economic flow on has further to go with the Chinese economy likely to have contracted in the March quarter."
In China, large parts of the country relaxed curbs on transport and travel on Monday as the number of new cases outside the worst-hit province fell to the lowest in a month.
2. Global markets slump
Stock markets around the world slumped as the outlook for global growth darkened, with Italy’s FTSE MIB down more than 4%, on track for its worst day since 2016. Frankfurt and Paris were both down more than 3% and London's FTSE was down a similar amount.
In Asia, South Korea's KOSPI slumped 3.9% overnight after the government declared a high alert, while Australia's S&P/ASX 200 slid 2.25%. China's blue-chip CSI300 index closed down 0.4%. Japanese markets were closed for a public holiday.
U.S. futures pointed to a sharply lower open, with the Dow futures contract down more than 800 points or 2.7% and futures on the S&P 500 and the Nasdaq 100 both down around 3% by 6:45 AM ET (1145 GMT).
CBOE's VIX volatility index, the so-called fear gauge, hit its highest level since August.
3. Oil tumbles, gold surges
Oil prices dropped 3% on Monday amid fears that the rapid spread of the virus outside of China could impact global demand.
Brent was down $2.11, or 3%, to $55.8 a barrel by by 6:45 AM ET (1145 GMT), after falling to an intraday low of $55.72 earlier. U.S. crude futures fell by $2.04, or 3.8%, to $51.34.
"Demand destruction for crude is likely to intensify as travel restrictions will likely increase as the coronavirus outbreak becomes a global threat and not just contained to China," said Edward Moya, senior market analyst at OANDA.
"Oil prices will remain vulnerable here as energy traders were not pricing in the coronavirus becoming a pandemic.
The flight to safety also saw gold prices rose more than 2% to hit their highest level since February 2013, taking its gains for the past year to more than 10%.
4. Bonds rally
Ten-year U.S. Treasury yields dropped to 1.401% on Monday, their lowest since July 2016, while the yield on the 30-year Treasury touched a record low, with more investors seeking out less risky assets like government debt.
Germany’s 30-year bond yield turned negative for the first time since October, meaning the entire yield curve in the euro zone’s biggest economy was once again below zero.
"Everybody sees that this could be another leg down for the economy, and we were already in quite a fragile state to begin with," said Rabobank's head of macro strategy, Elwin de Groot. "It could be another step toward a recession in more countries."
5. German IFO rises unexpectedly, but worst yet to come
Germany’s closely watched IFO business climate index unexpectedly rose this month, along with a gauge of future expectations and the IFO institute stuck to its first quarter growth forecast of 0.2%.
“The German economy seems unaffected by developments surrounding the coronavirus,” said IFO President Clemens Fuest in the report.
But other economists have greeted the report with a degree of skepticism, warning that the risk is for things to get worse before they get any better.
“Today’s IFO reading would in normal times be evidence of at least a bottoming out of the economy. However, these are no normal times. In our view, it is simply too early to gauge the exact impact on the economy, both for companies and analysts,” said Carsten Brzeski, Chief Economist ING Germany.
“One thing, however, is clear: as an open economy, Germany is again at the center of yet another adverse global event.”
1. G20 calls for coordinated response to coronavirus
Finance officials from the world's 20 biggest economies on Saturday called for a coordinated response to the coronavirus outbreak, which the International Monetary Fund predicted would pull down China's growth this year to 5.6% and cut 0.1% from global growth.
“But we are also looking at more dire scenarios where the spread of the virus continues for longer and more globally, and the growth consequences are more protracted,” said IMF Managing Director Kristalina Georgieva at the G20 Finance Ministers and Central Bank Governors Meeting.
China reported another fall in new cases on Sunday, but world health officials warned it was too early to make predictions about the outbreak as the number of new cases continued to increase in other countries.
Chinese PMI data on Saturday will show the first signs of the outbreak on the world’s second largest economy.
2. Can the dollar index breach the 100 level?
Leaving aside Friday’s declines, triggered by disappointing U.S. PMI data for February, last week saw the greenback rally to a near three-year high versus the euro, a 10-month high against the yen and an 11-year peak versus the Aussie. So far this month it has risen more than 2% against a currency basket.
The U.S. economy’s relative resilience to coronavirus has made the greenback the safe-haven of choice, at least temporarily.
The weak economic outlook in the eurozone and Japan against the background of the coronavirus epidemic is likely to continue to weigh on the euro and the yen.
The selloff in the yen marks a departure from the pattern in recent years where the Japanese currency rises in times of geopolitical or market turmoil due to Japan’s status as the world’s largest creditor nation.
“All considered we think the dollar should at least retain its strength, with a chance for more appreciation,” FX analysts at ING said in a note. “At this stage, we suspect that a break above 100 in DXY is just a matter of time.”
3. Fedspeak, U.S data
Federal Reserve Vice Chairman Richard Clarida is to speak at an economic policy conference in Washington on Tuesday, where other speakers include IMF Chief Economist Gita Gopinath and Cleveland Fed President Loretta Mester. Minneapolis Fed President Neel Kashkari and Dallas Fed President Robert Kaplan are also set to make appearances this week, with investors on the lookout for any comments on the virus impact.
Also on Tuesday, a report on U.S. consumer confidence will be closely watched for any indications that the global coronavirus outbreak is hitting sentiment.
Thursday’s durable goods orders data is forecast to be weaker amid a slowdown in factory output in Asia, while the halting of Boeing (NYSE:BA) 737 Max production in mid-January is also likely to weigh. Meanwhile, the second reading of U.S. fourth quarter growth is not expected to be subject to a major revision.
4. Eurozone data
Monday's German IFO report will be central to the direction of the euro this week. The Investing.com consensus is for a reading of 95.3 in the Business Climate Index, down from 95.9 in January. Other key releases will be Friday's inflation numbers for Germany and France which will be closely watched ahead of the upcoming European Central Bank meeting in March.
ECB President Christine Lagarde is due to deliver remarks at an event in Germany on Wednesday, while several other ECB officials, including Chief Economist Philip Lane will also give speeches this week.
5. Earnings results
Estimates from Refinitiv point to growth of 3.1% in the S&P 500's fourth-quarter earnings, defying expectations for a year-over-year decline. In January analysts had forecast a 0.3% fall.
Those figures don't reflect damage from coronavirus and earnings growth has been boosted by stronger-than-expected results from tech giants including Microsoft (NASDAQ:MSFT) and Apple (NASDAQ:AAPL).
This week investors will get results from more consumer-facing companies, including retailer Macy’s (NYSE:M), whose credit rating was cut to junk last week by S&P Global (NYSE:SPGI). Results also are due from Marriott International (NASDAQ:MAR), but that won't reflect the hit it and other hotel chains are currently taking throughout Asia.
1. A new phase for Covid-19 outbreak
As cases of the coronavirus appear to approach their peak in China, attention is switching to other countries.
Of particular concern is South Korea, where the number of confirmed cases has risen threefold this week to over 200, making it the largest cluster of cases outside China and the Diamond Princess cruise ship that is docked off Japan.
The BBC reported that the southern cities of Daegu and Cheongdo have been declared "special care zones". The streets of Daegu are now largely abandoned, it added. All military bases are in lockdown after three soldiers tested positive.
Chinese companies have already reported extensive shutdowns due to problems with their supply chains in China, but the spread of the disease in Korea and Japan, both countries with advanced health care systems and high population density, is likely to give a reliable indicator of how easily – or not - the outbreak can be contained outside China.
2. Chinese car sales plummet; yuan hits new 2020 low
The short-term impact of the virus continues to work show itself on the Chinese economy, pushing the Chinese yuan to a new low for the year at 7.04 to the dollar.
New car sales fell 92% on the year in the first two weeks of February, according to industry body data.
On Thursday, the International Air Transport Association had warned that the global airline sector would lose $29 billion in revenue due to the outbreak, the worst hit coming in China and the broader Asian market.
3. Dollar Takes a Breather After PMIs
The dollar has come off multi-year highs against developed market currencies, after stronger-than-expected business surveys out of Europe took the edge off fears about another global economic downturn.
The IHS Markit Composite purchasing managers index for the euro zone showed activity at its highest in six months, rising to a preliminary 51.6 from 51.3 in January.and defying expectations of a decline to 51.0. The U.K. composite PMI, meanwhile, also came in above expectations, staying at 53.3.
The pound and euro both came off this week’s lows in response. Sterling was trading at $1.2925 while the euro was back above $1.08 for the first time in three days.
The greenback continues to march higher against higher-yielding Asian currencies such as the Thai baht and Indonesian rupiah, as well as the Australian and New Zealand dollars, widely seen as proxies for Asian commodity demand.
4. Stocks set to open lower
U.S. stocks are set to open lower again as corporate warnings about the impact of the Covid-19 outbreak finally appear to sink in.
Following Apple (NASDAQ:AAPL), Procter & Gamble (NYSE:PG) warned on Thursday that its earnings would take a hit from supply chain disruptions and weak demand in China, its second-biggest market.
By 6:45 AM ET (1145 GMT), the Dow 30 futures contract was down 89 points or 0.3% while the S&P 500 Futures contract was down 0.3% and the Nasdaq 100 contract was down 0.4%.
The S&P is on course for its first weekly drop in three, after Goldman Sachs (NYSE:GS) warned on Thursday that stocks were exposed to a correction after their recent surge.
5. Gold surges on risk-off; Fed speakers eyed
After swinging both ways in the first half of the week, haven assets of all stripes are showing more consistent signs of strength.
Gold Futures hit a fresh seven-year high of $1,639.25 an ounce overnight, while Silver futures rose to their highest in over a month.
Government bond yields continue to move lower. Germany’s benchmark 10-Year yield hit a new four-month low of -0.46% overnight, moving up only one basis point after the PMIs. U.K. 10-Year yields have fallen 4 basis points this week despite data all but ruling out an interest rate cut from the Bank of England.
U.S. 30-Year Treasury yields, meanwhile, hit a new all-time low of 1.905% overnight, before retracing up to 1.92%.
There's another barrage of speeches from Federal Reserve officials due, with Raphael Bostic, Richard Clarida, Loretta Mester, Lael Brainard and Robert Kaplan all taking the microphone in the course of the day.
1. Dollar hits three-year high on signs of extended Fed pause, China loosening
The dollar hit its highest level against developed-market peers in nearly three years, thanks to gains against both the Japanese yen and the British pound.
The dollar index, which measures the greenback against a basket of six other currencies rose 0.2% to 99.767 by 6:40 AM ET (1140 GMT), on the back of reports confirming another death from the coronavirus in Japan. Reports of spreading infection in Korea sent it 1% higher against the Korean won and pushed it to a nine-month high against the Thai bhat, another reflection of fears for the broader Asian economy.
The dollar was also stronger against other emerging currencies, rising 0.4% against the Chinese yuan to 7.02 after the People’s Bank of China cut its one- and five-year prime rates by 10 and 5 basis points respectively.
2. Stocks set to open lower; ViacomCBS's earnings in focus
U.S. stocks are set to open mostly lower, still subdued by the minutes of the Federal Reserve’s last policy meeting which underlined how far the Fed is from cutting interest rates.
Minnesota Fed President Neal Kashkari, widely seen as one of the most dovish members of the Federal Open Markets Committee, said in a speech late on Wednesday that he expected the fed funds rate to stay unchanged for six months or even longer.
By 6:40 AM ET (1140 GMT), the Dow 30 futures contract was down 37 points, or 0.1%, while the S&P 500 futures contract was down in parallel and the Nasdaq 100 contract was down 0.2%.
The day’s light earnings roster is headed by gold mining giant Newmont Goldcorp (NYSE:NEM) and ViacomCBS (NASDAQ:VIAC).
3. Sanders profits as Warren takes a bite out of Bloomberg
Democratic candidates rounded on ex-Bloomberg Mayor Michael Bloomberg in his debut TV appearance with his rivals.
Massachusetts Sen. Elizabeth Warren appeared to strike the most telling blows, as Bloomberg struggled to defend a past in which multiple women working for his media company were bound by non-disclosure agreements after alleging sexual harassment or discrimination.
The New York Times, which said Bloomberg looked like an “out-of-practice politician”, credited Warren with a performance that may have helped revive her campaign, without significantly reeling in Vermont Sen. Bernie Sanders.
4. Musical chairs at Europe's banks
It’s time for musical chairs at Europe’s biggest banks. UBS, the world’s largest wealth manager, tapped ING Group’s Ralph Hamers to succeed Sergio Ermotti as chief executive later in the year, ending long-running speculation.
The appointment of an outsider to run Switzerland’s largest bank may raise eyebrows, given the recent experience of rival Credit Suisse (SIX:CSGN) with Tidjane Thiam, who fell foul of the country’s conservative financial establishment.
Hamers is renowned as a digital banking specialist, an area where UBS has struggled to make headway in recent years. However, his star has been waning in the last year, as the group’s stellar growth in Germany has plateaued, and as Hamers’ team has struggled to put behind them the taint of a record money-laundering fine in 2018.
UBS (NYSE:UBS) stock and ING stock both rose on the news.
5. Oil hits three-week high on China stimulus, Libyan outages
Oil prices rose to their highest in three weeks, as a market that was heavily shorted in the early weeks of the Covid-19 outbreak returns to a measure of balance in response to China's latest economic stimulus measures. Market participants are also starting to notice the effects of the sustained drop in Libyan production.
By 6:40 AM ET, U.S. crude futures were at $53.64 a barrel, down from an intraday high of $54.09, helped by predictions of a rapid rebound in Chinese factory activity from April by the CEO of shipping giant AP Moeller-Maersk.
The rebound has continued despite reports of another weekly build in crude stocks above expectations from the American Petroleum Institute. The U.S. government’s data on crude oil inventories are due at 10:30 AM ET, and analysts expect a build of just under 2.5 million barrels.
The rebound also shrugged off fresh comments from Russian oil minister Alexander Novak rejecting calls for an early meeting to discuss further output cuts with OPEC.
1. Melt Up; Gold touches 7-year high
After a sell-off that lasted almost 24 hours, markets are back in risk-on mode, convinced that the economic impact from the Covid-19 outbreak will be brief and manageable, and equally convinced that global central banks will support markets at current levels even if it isn’t. Turkey's cut its key rate for a sixth time in a row Wednesday, by a larger-than-expected 50 basis points.
Indicators of excess flashing red include a seven-year high for gold futures at $1,613.95, and another 7.4% rise in futures on Palladium, as portfolio investors pile into a supply squeeze caused by production issues in South Africa and a surge in demand from the automotive industry, its biggest user.
That comes against the backdrop of another surge in Tesla (NASDAQ:TSLA) stock after analysts at Piper Sandler raised their price target by 27% to $928, citing the outlook for its energy generation and storage businesses. That means that Wall Street now has at least one analyst supporting the optimism of Tesla’s notoriously bullish retail investor base.
2. Fed speeches, minutes to provide reality check
The thesis of central banks coming to rescue will be tested in the course of the day as a succession of Federal Reserve officials step up to the microphone. Cleveland Fed President Loretta Mester is first up at 8:30 AM along with Atlanta Fed President Raphael Bostic. They’re followed by Minnesota Fed President Neal Kashkari at 11:45 AM and Dallas’ Robert Kaplan at 1:30 PM. Richmond’s Thomas Barkin rounds off the procession at 4:30 PM.
The more backward-looking publication of minutes from the Fed’s last policy meeting will also be out at 2 PM ET.
There’s also January data for housing starts and building permits, as well as January’s producer price inflation numbers.
3. Stocks march higher, shrug off Apple's warning
U.S. stock markets are set to open higher after shrugging off Apple’s warning that it would miss its first-quarter sales target due to the Covid-19 outbreak.
By 6:40 AM ET (1140 GMT), the Dow 30 futures contract was up 59 points or 0.2%, while the S&P 500 Futures contract was up 0.1% and the Nasdaq 100 contract was up 0.3%.
Overnight, the Stoxx 600 in Europe hit a new record high but Chinese stock indices were mixed, as official data showed the official death toll hitting 2,000, and the number of confirmed cases topping 75,000.
Coincident economic data continue to show a mixed picture, with less than three-quarters of Macau’s casinos taking advantage of the right to reopen on Thursday, deeper cuts to refining runs at refineries, and extensive pay cuts and arrears at Chinese companies.
4. Bloomberg makes his campaign debut
Mike Bloomberg takes the stage with other candidates for the Democratic Party nomination for the first time in a televised debate at 8 PM ET (0100 GMT on Thursday).
The billionaire ex-Republican mayor of New York launched a media blitz earlier this week, but has yet to be challenged seriously either by voters or by the other candidates, who are sure to target him tonight. Bloomberg’s campaign said on Wednesday he would sell his financial information company – valued by some at around $60 billion – if elected.
The debate comes ahead of next week’s primary in Nevada, which arguably represents ex-Vice President Joe Biden’s last chance of resurrecting his campaign, and which also tests the ability of Vermont Senator Bernie Sanders and South Bend Mayor Pete Buttigeig, to garner support among the Latino and African-American communities, a factor seen as crucial to their chances of defeating Donald Trump in November.
5. Oil hits three-week high ahead of API.
Crude oil futures are extending their recovery. By 6:40 AM ET, they were up $53.02 a barrel, near their highest in three weeks.
The American Petroleum Institute is due to release its weekly estimate of U.S. supplies of crude and refined products at 4:30 PM, against a backdrop of expectations for an increase of 3.77 million barrels in crude inventories.
U.S. shale companies reporting after the closing bell on Tuesday also provided a glimpse of light at the end of the tunnel, with Diamondback Energy and Devon Energy both beating expectations for earnings in the last three months of 2019.
1. Apple infected by Coronavirus
Apple (NASDAQ:AAPL) warned that it would miss its sales targets for the current quarter due to Covid-19 outbreak, the biggest western industrial company yet to make such a statement. It cited lower sales in China itself, which accounts for around 20% of iPhone sales, and production constraints in its supply chain.
Extended travel curbs and quarantining mean that China’s factories are running at around half of their capacity currently, according to various reports, even though the official Chinese data continue to show a slowdown in the incidence of new infections and deaths.
Apple (NASDAQ:AAPL) didn’t update its sales guidance of between $63 and $67 billion, reflecting a high degree of uncertainty that spooked global markets on Tuesday.
2. China to waive tariffs as Pelosi bashes Huawei
China said it would allow companies to apply for exemptions from tariffs on a broad range of imports from the U.S., including agricultural goods such as pork, soybeans and beef, as well as energy imports such as crude oil and liquefied natural gas.
The moves, which go beyond what China agreed to in its Phase-1 trade deal with the U.S., appear aimed at keeping a lid on food and energy prices at a time when millions of Chinese workers are having to accept reduced pay checks due to Covid-19-related disruptions.
The announcement came only hours after House Speaker Nancy Pelosi underlined the breadth of U.S. hostility to China’s growing clout in telecommunications, telling reporters that ““If we were to let Huawei have the information-highway dominance, it would be like putting the state police in the pocket of every person who uses that highway.”
3. Stocks set to open lower; Walmart's disappointing Q4
U.S. stock markets are set to reopen after the holiday weekend sharply lower, as Apple’s warning reverberates through global markets. Disappointing holiday-quarter sales from Walmart are adding to the gloom.
Chinese stock markets had ended lower, with the blue-cap A Shares index losing 1.1% and the tech-heavy CSI 300 losing 0.5%, and most European markets had followed them. By 6:30 AM ET (1130 GMT), the Stoxx 600 was down 0.4% at 430.10.
The Dow 30 futures contract was indicated down 156 points, or 0.5%, while the S&P 500 Futures contract was down 0.4% and the Nasdaq 100 contract was down 0.7%.
Other markets were also in risk-off mode: the yield on the U.S. 30-Year Treasury bond fell below 2% and gold futures rose 0.3% to $1,590.35 an ounce. U.S. crude oil futures fell 1.5%.
The tone wasn't helped by a weaker-than-expected ZEW sentiment index out of Germany and a drop in average earnings growth in the U.K.
4. Europe’s banking sector is on the move - just not in the same direction.
HSBC said it would cut 15% of its workforce and take over $7.2 billion in restructuring charges after profit fell 53% in 2019. HSBC stock fell 6.1% in London to a two-week low.
HSBC said it will slim down its investment bank – especially in the U.S. – to concentrate on more profitable activities. Another source of concern was that the bank still hasn’t found a permanent CEO to replace John Flint.
Elsewhere, Italy’s banks rode a wave of merger speculation after Intesa Sanpaolo (MI:ISP), the country’s largest domestic lender, made an all-stock offer worth 4.9 billion euros ($5.3 billion) for smaller rival UBI Banca (MI:UBI). Intesa stock rose 2.6%, while UBI stock rose 23%. Others lifted by the speculation included Banco Bpm (MI:BAMI) stock (+7.2%) and Mediobanca (MI:MDBI) (+2.0%).
Cynics suggested that Intesa moved in order to make it harder for the government to pressure it into taking over perennial basket-case Monte dei Paschi di Siena SpA (MI:BMPS) (+3.4%).
5. Bezos launches $10 billion fund to tackle Climate Change
Amazon.com (NASDAQ:AMZN) founder Jeff Bezos said he would set up a $10 billion philanthropic fund to counter the effects of Climate Change.
The ‘Bezos Earth Fund’, as it will be known, will back scientists, activists, non-government organizations and any other effort that “offers a real possibility to help preserve and protect the natural world,” and will be separate from Bezos’ commercial investments in experimental new energy technologies.
Bezos had sold over $4 billion in Amazon (NASDAQ:AMZN) stock in the last couple of weeks, according to SEC filings, something that went well beyond the funding for his Blue Origin rocket project, which he has previously said he funds to the tune of $1 billion a year.
1. Coronavirus curbs starting to work China says
The number of new coronavirus cases in China fell on Sunday and a health official said the intense efforts to stop its spread were beginning to show results.
China's latest figures showed 68,500 cases of the illness and 1,665 deaths, most of them in Hubei. On Sunday, China reported 2,009 new cases, down from 2,641 the previous day, and 142 new deaths, down one from 143 the previous day. Outside of China, there have been about 500 cases and four deaths to date.
The economic impact of the epidemic is still unknown. Some analysts have estimated that China's annual growth could slow to between 4% and 5%, down from the 6% annual growth estimated by the government.
But some investors expect the shortfall in growth to be largely contained to the first quarter, which would give China's economy room to catch up later this year.
2. U.S. market holiday
U.S. financial markets will be closed on Monday for Presidents Day. The New York Stock Exchange and Nasdaq will be closed and trading on CME exchanges will be halted, meaning there will be no settlements for gold or crude oil futures contracts.
The main U.S. indexes rose late Friday, notching a gain for the week following a CNBC report, citing sources, that the White House was considering a tax incentive for people in the U.S. to buy stocks.
U.S. stocks had set record highs on Wednesday boosted by hopes for accommodative monetary policy from the Fed after Chairman Jay Powell said he was monitoring the progress of the coronavirus outbreak for its impact on China and the global economy.
3. Fed minutes; U.S. data
The U.S. central bank is due to release the minutes of its January meeting on Wednesday with investors paying close attention for any mention of the coronavirus impact. In addition to the minutes, there are several Fed policymakers scheduled to speak during the week, including Minneapolis Fed President Neel Kashkari, Dallas Fed head Robert Kaplan and Fed Governors Lael Brainard and Richard Clarida.
Away from the Fed, data on housing will dominate the economic calendar, with reports on due on housing starts, building permits and existing home sales. These are expected to indicate that the housing sector is continuing to perform very solidly.
4. Will UK data point to Boris bounce?
The UK is to release a slew of data this week and while it may still be too early to see any signs of a post-election rebound in the December jobs report due out on Tuesday inflation figures due out on Wednesday and a report on retail sales a day later could point to signs of a ‘Boris bounce’ after the prime ministers emphatic election victory.
Manufacturing and services PMI data for February due for release on Friday will indicate whether the strong uptick seen last month, which helped forestall a Bank of England rate cut, is continuing.
Investors will also continue to watch speculation over whether the UK government will move towards more aggressive fiscal stimulus after the shock resignation of Chancellor Sajid Javid last week, who is to be replaced by Rishi Sunak.
5. Eurozone data may show first signs of virus impact
After the euro suffered its worst start to a year in five years, economic data this week will be closely watched as reports may give the first signs of the coronavirus impact on the bloc’s economy.
The German ZEW on Tuesday will be the first post-coronavirus indicator while consumer confidence and PMI figures on Thursday and Friday will also attract close attention. A contraction would most likely be reflected in the manufacturing PMI, dampening expectations for an economic rebound and underlining the case for the European Central Bank to keep rates on hold for longer.
The ECB is scheduled to publish the minutes of its January meeting on Thursday and the main focus will likely be on any details to do with its monetary policy strategy review.
1. Covid confusion: Singapore warns of recession, HK cases hit 56
Confusion reigned over the spread of the Covid-19 virus after Chinese authorities took over 100 presumed victims off the official death, saying it had double-counted. The overall death toll still rose by over 100 to 1,383, while officially confirmed cases in China rose by some 5,000 to over 64,000. That's a big drop from the 15,000 increase reported on Thursday, which was down to changes in China's methodology for classifying confirmed cases.
Also on Friday, China’s National Health Commission said 1,716 health workers had contracted the virus, and six of them had died – the first time it had broken out such numbers.
Hong Kong, which has now confirmed 56 cases, said tourist arrivals had fallen by over 50% in January. HSBC Holdings (LON:HSBA)and Royal Dutch Shell (LON:RDSa) joined the list of companies sending workers home from their Singapore and Hong Kong offices in response to reports of infections. Singapore’s Prime Minister said the island state could face recession due to the virus. Pharma giant AstraZeneca (LON:AZN) warned of a possibly significant hit to its business this year from the virus.
2. U.S. charges Huawei with racketeering
The U.S. formally charged Huawei with racketeering, citing years of intellectual property theft.
The measures underline the U.S.’s continuing efforts to keep pressure on Beijing against the backdrop of ongoing trade tensions, and in particular its efforts to stop the spread of Huawei’s global presence in 5G networks.
The move comes only days after the U.S. charged four Chinese military personnel with theft in hacking the networks of credit reporting giant Equifax (NYSE:EFX).
3. King Dollar hits four-month high
The dollar hit its highest level since late September against its developed-market peers as the euro hit its lowest since 2017 on the back of weak growth numbers.
The euro zone’s economy grew by only 0.9% on the year in the fourth quarter, according to data from Eurostat that were revised down from original estimates. In quarterly terms, GDP eked out 0.1% growth as Germany, the region’s biggest economy, stagnated.
The dollar index hit an overnight high of 99.04, before retreating to 98.968 as of 6:30 AM ET (1130 GMT). It’s risen 2% in the last month.
The greenback has also advanced against most emerging market currencies since the Covid-19 outbreak hit. Commodity currencies in particular have suffered – the rand, real and ruble losing between 3.2% and 4.2% over the last month. The exception has been the peso, which hit new highs overnight despite another 25 basis point rate cut from the central bank on Thursday.
A further factor strengthening the dollar was the Federal Reserve’s decision to scale down its daily and two-week repo operations a little ahead of schedule, tightening liquidity in U.S. funding markets.
4. Stocks set to shrug off virus concerns; Nvidia earnings blow past forecasts
U.S. stocks are set to open higher, shrugging off losses made late on Thursday, shrugging off the dollar’s rise, which may weigh on the earnings of multinationals and big exporters over the rest of the year.
By 6:40 AM ET, the Dow 30 futures contract was up 24 points or 0.1%, while the S&P 500 Futures contract was up 0.1% and the Nasdaq 100 was up 0.3%.
The Nasdaq in particular was supported by chipmaker Nvidia, whose quarterly earnings handsomely beat expectations after the closing bell on Thursday, thanks to strong demand for its data center and gaming chips. Sales in the fourth quarter rose 41%, while adjusted earnings per share more than doubled. The company said it had reduced expectations for Chinese sales by $100 million in the current quarter, but its forecast for overall sales was still above consensus forecasts.
5. U.S. retail sales, industrial output data due
After a light week for data, the U.S. releases numbers for January’s retail sales at 8:30 AM ET, with analysts expecting a 0.3% increase on the month in both the headline number and the core retail sales component.
Data for industrial production and manufacturing output in January follow at 9:15 AM, while the University of Michigan’s consumer sentiment index is due out at 10 AM.
Federal Reserve Chairman Jerome Powell told Congress this week that there had been no visible impacts on the U.S. economy so far from the Covid-19 outbreak, and that the Fed would only react to “persistent” and “material” effects, given the ongoing strength of the U.S. economy.
1. Creative counting casts doubt on virus tally
The Covid-19 coronavirus, as it’s now officially known, is mutating – not biologically, but statistically. Chinese authorities announced a second big daily drop in the rate of new infections Tuesday, but reports from outside China suggest that that may be due more to changes in China’s way of counting.
As of late last week, China is no longer counting those who test positive for the virus as infected as long as they show no symptoms of the disease. Given that Chinese studies acknowledge that patients can go for up 24 days without showing symptoms, that creates a clear risk of undercounting.
Outside China, the number of cases on a cruise ship quarantined in Yokohama, Japan, rose to over 170, while Singapore’s financial district was rocked when DBS Group, the island state’s largest bank, sent workers home after discovering a case among its workforce. The Chinese Formula 1 Grand Prix was cancelled, while a major shipbuilder announced force majeure on its conracts, saying that labor shortages would stop it delivering two large bulk carriers on time.
2. New Hampshire
Senator Bernie Sanders won the New Hampshire Democratic primary, but strong showings by Pete Buttigeig and Minnesota Senator Amy Klobuchar means that the race for the nomination is still very much an open one.
Former vice-president Joe Biden again trailed badly in fifth place, as he had done in Iowa. His hopes of the nomination now depend heavily on his performance in Nevada and South Carolina, which will show if he can still count on his traditional support among minorities.
3. Stocks set to march higher
U.S. stock markets are set to open higher again, bolstered by the improving official Chinese data and by the awareness that central banks are unlikely to withdraw any of the liquidity provided in recent weeks to soothe markets during the Covid-19 outbreak.
Federal Reserve Chairman Jerome Powell said on Tuesday that barring “persistent” and “material” impacts on the U.S. economy, the Fed’s current monetary policy stance would remain appropriate for the near future. That means at least two more months of repos and bill purchases, he added.
By 6:30 AM ET (1130 GMT), the Dow 30 futures contract was up 131 points, or 0.5%, while the S&P 500 contract was up 0.4% and the Nasdaq 100 contract was up 0.5%.
European stocks also hit new highs overnight, the benchmark Stoxx 600 rising 0.5% on the back of solid earnings from luxury giant Kering (PA:PRTP) and Dutch brewer Heineken, among others.
4. Earnings season revs up again with tech, financial reports; Lyft's update disappoints
After a relatively quiet start to the week, earnings season gets back into full swing, with updates from CVS before the open and Cisco after the close.
CME Group, Shopify, Equinix and Moody’s also are due to report.
Lyft (NASDAQ:LYFT) will also be in focus in early trade after the company chose not to follow Uber (NYSE:UBER) in moving up the date when it expects to be profitable. The company’s revenue growth slowed to 2.5% in the second half of last year from 6% in the first half, while its net loss widened. The outlook and the quarterly numbers together combined to push the stock down 5.5% in after-hours trading.
One of Uber’s largest investors, Softbank, also reported overnight. Its reported profit fell 99% after its Vision Fund posted a $2 billion loss, caused largely by writedowns of its investments in WeWork. Softbank stock had soared by 12% on Tuesday after a U.S. court cleared the plans of another big portfolio company, Sprint Corp., to merge with T-Mobile US (NASDAQ:TMUS).
5. OPEC to estimate virus hit to global oil demand
The U.S. government cut its forecast for global oil demand this year by 300,000 barrels a day due to the Covid-19 outbreak, a step that sets the stage for similar actions by OPEC and the International Energy Agency as they release their monthly reports over the next couple of days.
OPEC is due to update its latest estimates for global supply and demand in its monthly report today, while the IEA’s report is due to follow on Thursday.
The short-term drop in demand was in evidence on Tuesday, when the American Petroleum Institute reported a 6 million barrel increase in U.S. crude inventories last week. That’s more than twice the increase predicted for the official government inventory count that is due at 10:30 AM ET (GMT)
Crude prices continue to recover gradually after a brutal sell-off, however. By 6:25 AM ET, U.S. crude futures were up 1.6% at $50.73 a barrel, while Brent futures were up 2.2% at $55.19.
1. New coronavirus infections slow; death toll tops 1,000
The death toll from the coronavirus hit 1,016, a 12% increase from Monday. However, the number of confirmed new cases fell 19% from Monday to less than 2,500. Also, the number of confirmed recoveries is still running at four times the death count. Assuming the reliability of Chinese data – which have been seriously questioned by local media in recent days – the outbreak appears to be losing momentum.
China’s transport ministry said it expects 160 million people to return to work over the next week, while reports suggest that the need for employers and local governments to screen workers returning from their home provinces will create delays in returning both production and consumption to pre-outbreak levels.
Indonesian President Joko Widodo called for a big fiscal stimulus to cushion the impact on Indonesia’s economy. Singapore’s tourism head said arrivals could fall as much as 30% this year, while a survey of Chinese realtors suggested new apartment sales were down 90% on the year in the first week of February.
2. Sanders seen leading in New Hampshire primary
The Democratic Party has a chance to put the debacle in Iowa behind it as voters head to the polls in the New Hampshire primary.
Reports suggest a stable lead for Vermont Senator Bernie Sanders, due partly to his high recognition in the region, and a strong second place for South Bend mayor Pete Buttigeig. In other words, a reprise of the Iowa double-billing. Minnesota Senator Amy Klobuchar is polling in third place.
The vote may deal potentially fatal blows to the campaigns of former vice-president Joe Biden and Senator Elizabeth Warren, both of whom fared badly in last week’s televised debate.
3. Stocks set for new records at opening
U.S. stock markets are set to extend gains and set new record highs at the opening, on hopes that the slowing rate of new infections signals the beginning of the end for the coronavirus.
By 6:30 AM ET (1130 GMT), Dow 30 futures were up 68 points or 0.2%, while S&P 500 Futures were up 0.2% and Nasdaq 100 futures were up 0.3%.
Stocks likely to be in focus include Mastercard (NYSE:MA), which received approval from China’s central bank to run a bank card clearing operation, part of a gradual promised opening of the country’s financial sector.
Earnings season continues to wind down, with Exelon, Martin Marietta, advertising group Omnicom and toymaker Hasbro, among others. In Europe, Daimler and Michelin both fell after posting gloomy outlooks for 2020.
4. Jerome Powell heads up the Hill
Federal Reserve Chairman Jerome Powell will start two days of regular testimony before Congress, with the focus likely to be on his assessment of the impact of the coronavirus on the outlook for the U.S. economy.
The January employment report showed no sign of derailing growth, with the creation of more jobs than expected, more people entering the labor force and average earnings ticking up slightly in annual terms.
Powell’s Fed colleagues Michelle Bowman and Patrick Harker both said on Monday that the Fed’s policy was easy enough to support the economy for now, and Powell too is expected to resist any pressure for further rate cuts or balance sheet expansion.
5. Sprint / T-Mobile merger set to be approved
A federal judge is due to rule on the much-delayed merger of Sprint (NYSE:S) and T-Mobile US (NASDAQ:TMUS), currently the third and fourth-largest mobile phone network operators in the U.S.
Sprint stock rose some 69% in after-hours trading on Monday after The Wall Street Journal reported that the merger is likely to be cleared, over the objections of state attorneys-general who argued it would lead to higher cellphone bills.
Shares in Deutsche Telekom (DE:DTEGn), T-Mobile’s controlling shareholder, rose 4.1% in Germany in early trading in Europe on Tuesday.
1. Coronavirus death toll tops SARS; U.K. declares crackdown
The death toll from the Chinese coronavirus outbreak hit 910, more than claimed by the SARS virus, after a weekend with no significant reduction in the rate of fatalities, and amid growing concern that the Chinese authorities may have under-reported both the incidence of new cases and of fatalities.
The World Health Organization, which had earlier praised China for its transparency, warned that what has been visible so far may only be “the tip of the iceberg.” Chinese state media reported one senior local scientist as saying that the incubation period could be as much as 24 days, rather than the 14 previous estimated.
The virus reached three European countries – France, Spain and the U.K. – just through one attendee at a business conference in Singapore in January, a development that illustrates how quickly so-called ‘superspreader’ events can transmit the disease. The U.K. declared the outbreak a "serious and imminent" threat to public health, a move that allows for forcible quarantining of suspected patients.
2. China returns to work, gradually
The virus continues to ripple through the world economy. Foxconn, which manufactures most of Apple’s iPhone at its Chinese factories, cautiously tried to restart production like many others on Monday, after an extended New Year holiday. However Nikkei reported that the authorities stopped at least one of its plants from reopening, due to contagion fears.
Many other factories remain closed or operating at reduced capacity. Kia Motors said it would shut all three of its plants in South Korea due to component shortages arising from disruption to its Chinese supply chain, while Bloomberg reported that BHP is in talks with Chinese customers to defer contracted deliveries of copper.
That echoes last week’s developments in the LNG market, where Chinese state buyers declared force majeure in order not to take delivery of contracted volumes of gas.
3. Stocks set to open mixed
U.S. stock markets are set to open mixed after weak signals from Chinese and European markets damped the appetite to push higher.
By 6:30 AM ET (1130 GMT), the Dow 30 futures contract was up two points, essentially unchanged, while the S&P 500 futures contract was up 0.1% and the Nasdaq 100 futures contract was up 0.2%.
The main U.S. indices had had their best week in nearly two months last week in response to liquidity injections in China and signs of still-robust U.S. economic growth. However, Chinese markets reacted badly to a spike in consumer inflation in January that was caused by coronavirus-related disruptions to food supplies, while European markets were spooked by a sharp drop in Italian industrial production and in the Sentix investor confidence index.
Today’s modest earnings roster is headed by Allergan (NYSE:AGN), Restaurant Brands and First Data Corp(NYSE:FDC), while Southern Copper reports after the bell.
4. Merkel's heir-apparent quits after far-right debacle
Angela Merkel’s heir apparent said she wouldn’t seek to lead her party into the next national elections, deepening the crisis in Germany’s ruling Christian Democrats and casting a big question mark over the political direction of Europe’s largest economy.
The center-right party, which runs a shaky coalition with the center-left Social Democrats at federal level, has been in turmoil since one of its regional parties formed an informal pact with the far-right Alternative fuer Deutschland party, breaking a 75-year tabu in German politics.
Annegret Kramp-Karrenbauer, who had been set to continue Merkel’s centrist course, had been unable to assert her authority over the Thueringia regional CDU. Her departure sets the stage for a debate over whether to continue with centrism, or to tack to the right to reclaim votes from the AfD.
5. Parasite's win sends Barunson soaring
Shares of Barunson Entertainment & Arts Corp (KQ:035620) rose 19% in Seoul after the company behind the movie ‘Parasite’ basked in the glory of winning the Best Picture Oscar at the 2020 Academy Awards.
Parasite – a low-budget Korean-language thriller - became the first foreign-language movie ever to take the prime award in over 80 years of the ceremony.
The stock has added nearly 50% since ‘Parasite’ received its nomination.