Saturday, 29 February 2020

Markets fall, declines “most probably not over yet”

Markets fell on Friday.

The S&P 500 fell 0.8 percent and the STOXX Europe 600 tumbled 3.5 percent.

Earlier in Asia, both the Shanghai Composite and Nikkei 225 plunged 3.7 percent.

Analysts at UniCredit Bank said that with no sign that the COVID-19 outbreak is levelling off, the decline in markets “is most probably not over yet”.

US stocks managed to recover partially from earlier heavy losses after Federal Reserve Chairman Jerome Powell said on Friday that the central bank is “closely monitoring developments and their implications for the economic outlook”.

Indeed, some analysts see the likelihood of a rate cut from the Fed soon.

“It’s definitely a signal of a March cut,” said Julia Coronado, a former Fed staffer and now president of MacroPolicy Perspectives.

Bank of America sees a half percentage point cut in March “to stem the panic in markets and support economic sentiment.”

Friday, 28 February 2020

Markets plunge, “a miracle if we avoid a recession”

Markets fell sharply on Thursday.

The S&P 500 plunged 4.4 percent, the STOXX Europe 600 tumbled 3.8 percent and the Nikkei 225 sank 2.1 percent.

David Madden, market analyst at CMC Markets UK, wrote in a note that the number of confirmed cases of COVID-19 “is on the rise, and so is the number of countries that have infections”. This could reduce economic activity “as lockdowns will disrupt the business world”.

MUFG chief economist, Chris Rupkey said that “it will be a miracle if we avoid a recession”.

Thursday, 27 February 2020

Markets dragged down as COVID-19 continues to spread

Markets were mostly lower on Wednesday.

The S&P 500 fell 0.4 percent and the Nikkei 225 fell 0.8 percent. The STOXX Europe 600 ended flat.

The COVID-19 outbreak dominated concerns on Wednesday as cases continued to rise outside of China.

“We’ll see a second drop in the equity markets once the number of infected in these countries with single-digit infections start bumping up after the incubation period of 14 days,” wrote Dec Mullarkey, a managing director of investment strategy at SLC Management, in a note.

“Investors have largely been caught off-guard by the serious and far-reaching economic consequence of the coronavirus,” said Nigel Green, founder and chief executive of the deVere Group, a financial services and advisory company.

Wednesday, 26 February 2020

Markets tumble, El-Erian says don't buy the dip

Markets fell sharply for a second day on Tuesday.

The S&P 500 plunged 3.0 percent, the STOXX Europe 600 fell 1.8 percent and the Nikkei 225 sank 3.3 percent.

Markets fell as the number of worldwide cases of COVID-19 rose to 80,238 with at least 2,700 deaths.

Becky Liu, head of China macro strategy at Standard Chartered Bank, said that China’s first quarter GDP is expected to deteriorate “very materially” to only 2.8 percent.

Federal Reserve Vice Chairman Richard Clarida said on Tuesday that while it was still too soon to tell what the impact on the US economy might be, the central bank will “respond accordingly.”

Indeed, many economists think that the Federal Reserve will be forced to cut interest rates soon.

“Sitting still would be seen as being tone-deaf,” said Carl Tannenbaum, chief economist at Northern Trust.

Others, though, point out that a rate cut may not be the answer as it primarily addresses demand shock.

“Because of its genesis in China, coronavirus is both a demand and a supply shock to the global economy,” said Brian Nick, chief investment strategist at Nuveen, in a Tuesday note.

Erik Nielsen, group chief economist at UniCredit Bank, said that markets have reacted in “a rather casual, and inconsistent, way” because of “apparent confusion about the nature of demand versus supply shocks and the (limited) effectiveness of policy stimulus in these circumstances”.

Indeed, Allianz chief economic advisor Mohamed El-Erian told CNBC that “this is different” and “I would continue to resist, as hard as it is, to simply buy the dip”.

Tuesday, 25 February 2020

Markets plunge as COVID-19 spreads

Markets plunged on Monday.

The S&P 500 lost 3.4 percent and the STOXX Europe 600 lost 3.8 percent.

In Asia, the Shanghai Composite lost just 0.2 percent but the KOSPI plunged 3.9 percent.

Markets fell as the spread of the COVID-19 virus beyond China led to worries that the outbreak will hit economies harder than previously expected.

“Markets were betting that the coronavirus was going to be contained in China, and that we would see some V-shaped recovery. But as headlines on the virus spread have come out, there’s uncertainty how far this will go,” said Keith Lerner, chief market strategist for SunTrust Advisory Services.

Monday, 24 February 2020

COVID-19 looking more like a pandemic

Markets fell last week, with the S&P 500 falling 1.3 percent after two consecutive weeks of gains.

The spread of the COVID-19 epidemic from China to the rest of the world was a driver of the falls as the outbreak looks increasingly like a pandemic.

As of Sunday, there were 602 cases in South Korea, the most outside China. In response, the country has been put on its highest alert level for the disease.

Iran has reported 28 cases, including 5 deaths, and cases with links to Iran have already turned up in Canada and Lebanon.

Outside Asia, Italy has the largest number of cases at 132, with two deaths.

“When several countries have widespread transmission, then spillover to other countries is inevitable,” said Anthony Fauci, head of the National Institute of Allergy and Infectious Diseases.

“I don’t think the answer is shutting down the world to stop this virus. It’s already out,” said Michael Osterholm, director of the University of Minnesota’s Center for Infectious Disease Research and Policy. “I think we have to expect there are going to be many locations around the world that will experience what China is experiencing.”

Saturday, 22 February 2020

Markets fall as COVID-19 leads to “increase in recession probabilities”

Markets were mostly lower on Friday.

The S&P 500 fell 1.1 percent, the STOXX Europe 600 fell 0.5 percent and the Nikkei 225 fell 0.4 percent.

The Shanghai Composite rose 0.3 percent amid indications that the spread of the COVID-19 virus in China may be slowing but concerns about its spread elsewhere and the likely impact on the global economy kept markets down.

“The coronavirus outbreak contains a significant likelihood of impact to the global economy and the potential to become a black-swan type event,” warned Bank of America Global Research rates strategist Bruno Braizinha, in a note on Friday. “The uncertainty has been reflected in the market and has naturally led to an increase in recession probabilities.”

“Nobody has a really good handle on just what the impact is on supply chains,” said Luke Tilley, chief economist of Wilmington Trust. “It’s understandable that some investors are moving to a risk-off mode.”

Friday, 21 February 2020

Markets mixed as People's Bank of China cuts interest rates

Markets were mixed on Thursday.

The S&P 500 fell 0.4 percent and the STOXX Europe 600 fell 0.9 percent.

Earlier in Asia, though, the Nikkei 225 rose 0.3 percent and the Shanghai Composite jumped 1.8 percent after the People's Bank of China cut interest rates again. The one-year loan prime rate was reduced from 4.15 percent to 4.05 percent and the five-year rate was reduced from 4.80 percent to 4.75 percent.

Concerns over the COVID-19 outbreak returned after South Korea reported its first death from the disease amid a jump of 53 new confirmed cases.

“I think investor are starting to question the idea that the economic impact of the epidemic is going to be only transitory,” said Adam Phillips, director of portfolio strategy at EP Wealth Advisors.

Goldman Sachs’ chief global equity strategist Peter Oppenheimer said that “the impact of the coronavirus on earnings may well be underestimated in current stock prices, suggesting that the risks of a correction are high”.

Thursday, 20 February 2020

Markets rise as COVID-19 outbreak seen ebbing

Markets were mostly higher on Wednesday.

The S&P 500 rose 0.5 percent to end at another record high, the STOXX Europe 600 rose 0.8 percent and the Nikkei 225 rose 0.9 percent. However, the Shanghai Composite fell 0.3 percent.

Fears over the COVID-19 outbreak took a back seat on Wednesday as Chinese officials said the rate of new cases has begun to ebb.

Still, some remain cautious.

“The global economic outlook remains mired in uncertainty at this point in time, with coronavirus-related warnings emanating out of Apple and corporate America,” said Han Tan, market analyst at FXTM, in a research report.

However, Mark DeCambre at MarketWatch noted that everything is rising, not just stocks. Gold, the US dollar and bond-pegged ETFs have also been rising.

“It’s almost as if investors putting money to work this year can’t lose, and that setup has caused some confusion among strategists, investors and analysts,” he wrote.

Wednesday, 19 February 2020

Markets fall as Apple warning brings back coronavirus concerns

Markets were mostly lower on Tuesday.

The S&P 500 fell 0.3 percent, the STOXX Europe 600 fell 0.4 percent and the Nikkei 225 plunged 1.4 percent.

Markets fell after Apple warned that it will not meet its second-quarter financial guidance because the COVID-19 outbreak in China is affecting its suppliers’ production.

“We haven’t really heard of any peak levels, that’s what’s beginning to sink into investors’ minds,” said Peter Cardillo, chief market strategist at Spartan Capital Securities, of the economic impact of the coronavirus outbreak.

“It took something like a warning from Apple that investors weren’t willing to ignore,” said Connor Campbell, analyst at financial spread better Spreadex.

Tuesday, 18 February 2020

Markets mixed as Japan faces recession while China gets monetary support

Markets were mixed on Monday.

The STOXX Europe 600 rose 0.3 percent and the Shanghai Composite surged 2.2 percent but the Nikkei 225 fell 0.6 percent. The US stock market was closed for a holiday.

Japanese stocks fell after the government announced that the economy contracted at a 6.3 percent annualised rate in the last quarter.

ING said in a report that Japanese consumer spending “slumped following the tax hike in the fourth quarter of 2019” and “will now struggle to do anything except contract further in the first quarter as the impact of Covid-19 weighs on consumer sentiment”.

ING added that “further government spending ... will not stop what started off as a technical downturn from evolving into a full-blown recession”.

The death toll in China from the COVID-19 epidemic jumped to 1,868 on Tuesday after 98 more people died but on Monday, Chinese stocks gained from news that the People’s Bank of China is cutting its one-year medium-term lending rate from 3.25 percent to 3.15 percent as well as injecting liquidity through securities purchases.

Monday, 17 February 2020

Stocks shrug off COVID-19 outbreak fears even as Japanese economy shrinks

The death toll from the COVID-19 epidemic in China jumped to 1,770 after 105 more people died, the National Health Commission said on Monday.

Outside mainland China, Taiwan reported the island's first death from the coronavirus, bringing the number of deaths outside the mainland to five.

Despite the COVID-19 crisis, stocks around the world have been rising. Julia Horowitz at CNN reported that the S&P 500 rose 1.6 percent last week, the STOXX Europe 600 rose nearly 1.5 percent and even the Shanghai Composite managed to rise 1.4 percent.

"Why do stocks continue to rise in the face of anxiety about the coronavirus? Ongoing support from the Federal Reserve, a stable outlook for corporate earnings and fear of missing out may have something to do with it," Horowitz suggested.

"I think the stock market is just under this belief that no matter what comes our way the Fed is going to save us," Peter Boockvar, chief investment officer at Bleakley Advisory Group, was quoted as saying.

Still, things could get worse.

At least it appears to be getting worse in Japan. The number of infections there has more than doubled since Thursday from 29 to 59 on Sunday night. And that is not counting the 355 cases on the Diamond Princess cruise liner off Yokohama.

Health Minister Katsunobu Kato on Sunday said that several cases have not been traceable to the source of infection. He added: "We are now in a new phase and must anticipate a spread of infections."

The coronavirus outbreak will add to problems for Japan's economy, which reportedly shrank at an annualised rate of 6.3 percent in the October-December quarter, the fastest rate of decline in six years.

Saturday, 15 February 2020

Markets mixed as coronavirus death toll rises again

Markets were mixed on Friday.

The S&P 500 rose 0.2 percent to another all-time high but the STOXX Europe 600 fell 0.1 percent.

In Asia, the Shanghai Composite rose 0.4 percent but the Nikkei 225 fell 0.6 percent.

US economic data on Friday were mixed. The University of Michigan consumer sentiment index rose to 100.9 in February from 99.8 last month but industrial production fell 0.3 percent in January, the fourth decline in the past five months.

Meanwhile, the China coronavirus, now officially known as COVID-19, claimed another 121 lives and 5,090 new cases, according to the latest report from China.

Rob Subbaraman, head of global macro research at Nomura, sees a possibly deep downturn in the economy. “The economic data we start getting for February could be a lot worse than people think,” he said.

Indeed, Singapore, with one of the highest reported number of confirmed cases outside China, sees a possible recession.

And Japan, which has reported fewer cases, may actually be experiencing a “stealth outbreak”, with new cases being found to have no connection with China, suggesting transmission within Japan's borders.

Friday, 14 February 2020

Markets fall as coronavirus cases spike

Markets mostly fell on Thursday.

The S&P 500 fell 0.2 percent and the Shanghai Composite fell 0.7 percent while the STOXX Europe 600 was flat.

Markets fell as the coronavirus outbreak in China continued to wreak havoc in the country, with 254 new deaths and a spike in new cases of 15,152, although the latter was partly due to a change in method in counting infections.

Meanwhile, Vietnam reported that a commune of 10,000 residents northwest of the capital Hanoi was put in lockdown due to a cluster of cases there.

Thursday, 13 February 2020

Stocks hit new highs as Powell talks of more debt-buying

Markets rose on Wednesday.

The S&P 500 rose 0.7 percent to a new all-time high, the STOXX Europe 600 rose 0.6 percent to also hit a record high and the Shanghai Composite jumped 1.6 percent.

China reported 2,015 new cases of coronavirus infection and 97 deaths on Wednesday.

However, Scott Wren, senior global market strategist at Wells Fargo Investment Institute, said in a note that the “market seems to be pricing in a virus that will be at least somewhat contained in the nearer term”.

The market could also be counting on the Federal Reserve to help maintain the rally.

In testimony before the Senate Banking Committee on Wednesday, Fed Chairman Jerome Powell the central bank would fight the next economic downturn by buying large amounts of government debt to drive down long-term interest rates.

Wednesday, 12 February 2020

Stock markets hit record highs, coronavirus hit on Chinese economy “will be limited”

Markets rose on Tuesday.

The S&P 500 rose 0.2 percent to a record high, the STOXX Europe 600 rose 0.9 percent to also hit a record high, and the Shanghai Composite rose 0.4 percent.

Even as the death toll from China's coronavirus outbeak continues to rise, Mike Loewengart, vice president of investment strategy at E-Trade, said that some investors “brave enough are stepping back into the market as they feel the selloff was overdone at the start of the situation”.

Indeed, Shane Oliver, head of investment strategy and chief economist at AMP Capital Investor, said that based on available data, “the hit to the Chinese economy in the current quarter will be limited”.

In contrast, Richard Grace, senior currency strategist and head of international economics at Commonwealth Bank of Australia, said that the “risk of a larger downgrade in Chinese GDP growth over Q1 20 and 2020 as a whole is gaining momentum” and therefore, “the risk of a larger downgrade to global growth is clear”.

Tuesday, 11 February 2020

Markets rise but spread of coronavirus outside China could yet accelerate

Markets mostly rose on Monday.

The S&P 500 rose 0.7 percent and the STOXX Europe 600 rose 0.1 percent but the Nikkei 225 fell 0.6 percent.

The Shanghai Composite rose 0.5 percent as factories in China reopened, although many are expected to remain shut for a while more as a result of the coronavirus outbreak.

“Earnings seem to be the story,” said Sahak Manuelian, managing director of equity trading at Wedbush Securities, noting that they have been “fairly strong” in the US.

Still, with the World Health Organization warning on Monday that the spread of the China coronavirus to people who have not visited China could be “the spark that becomes a bigger fire”, coronavirus fears “remain at the top of investors’ minds”, said Arnim Holzer, macro strategist for EAB Investment Group.

Indeed, Asian economies in particular are vulnerable to supply chain disruptions in China.

“Most Asian economies import 20-30% of their intermediate goods from China,” wrote analysts at Singapore’s DBS Group Research.

Monday, 10 February 2020

Coronavirus death toll surges but so do markets on hope Fed will “save the day”

The number of deaths from China's coronavirus outbreak surged past 900 in mainland China on Monday while the number of confirmed cases rose to over 39,800.

So far, though, global markets have been able to shrug off fears over the impact of the outbreak, with the S&P 500 for example jumping 3.2 percent last week.

William Watts at MarketWatch said that the resilience of the market suggests that “investor faith in the central bank backstop looks pretty solid”.

“I think investors have learned over a very long time that central banks and the Fed, in particular, will be there to save the day,” Michael Arone, chief investment strategist at State Street Global Advisors, was quoted as saying.

However, Watts cited a warning by Pavilion Global Markets analysts that with China keeping factories closed for extended periods, there could be disruptions to supply chains.

Victoria Fernandez, chief market strategist at Crossmark Global Investments, does not think that will happen though. “I think we’re going to see things start to turn around over the next couple months,” she said.

Saturday, 8 February 2020

Markets fall, strong US jobs report lowers Fed rate cut hopes

Markets mostly closed lower on Friday.

The S&P 500 fell 0.5 percent, the STOXX Europe 600 fell 0.3 percent and the Nikkei 225 fell 0.2 percent.

However, the Shanghai Composite rose 0.3 percent even as the number of deaths from China's coronavirus epidemic hit 722 on Saturday. The number of confirmed infections in China now exceeds 34,500.

In contrast, US stocks fell despite a better-than-expected jobs report for January, with 225,000 new jobs being added.

Liz Ann Sonders, chief investment strategist at Charles Schwab, said that the market may have been rallying in response to central bank easing elsewhere in reaction to the coronavirus and may “see a stronger-than-expected jobs report as reason to believe the Fed won’t cut rates, putting pressure on the market”.

Similarly, Alec Young, managing director of global markets research at FTSE Russell, said that “stocks are overbought after a huge rally, some of which has been predicated on hopes for a June Fed rate cut, which now seems highly unlikely”.

Friday, 7 February 2020

Markets rise as China cuts tariffs on US imports

Markets rose on Thursday.

The S&P 500 rose 0.3 percent, the STOXX Europe 600 rose 0.4 percent and the Shanghai Composite jumped 1.7 percent.

The coronavirus outbreak that started in China has now hit 28,256 cases globally and at least 565 deaths but virus concerns took a back seat on Thursday as China announced that it will start cutting tariffs on US imports on 14 February.

“China cutting tariffs is a driver of today’s gains,” said J.J. Kinahan, chief market strategist at TD Ameritrade.

UOB Private Bank’s Francis Tan, though, said that “a lot more that there’s ample liquidity in the market”.

Meanwhile, though, some analysts are sounding words of caution.

“The odds that the next 10% move is to the downside versus the upside, I think, are much higher,” said Miller Tabak + Co.’s lead strategist Matt Maley, who noted that the market has been “priced for perfection” for a while, making it harder to rally much higher from here.

Citigroup’s chief US equity strategist Tobias Levkovich said in a recent note that nearly “every client we talk to wants to buy the dip, and that is not comforting”, adding that “we are reticent to think that impact [of the coronavirus] is behind us now”.

Thursday, 6 February 2020

Markets rise with coronavirus death toll

Markets rose on Wednesday.

The S&P 500 rose 1.1 percent to a record high, the STOXX Europe 600 jumped 1.2 percent and the Shanghai Composite rose 1.3 percent.

“Today’s rebound is being driven by rumors about some progress made on the virus, vaccines that are being worked on and efforts to slow down the spread,” said Randy Frederick, vice president of trading and derivatives at Charles Schwab.

Nevertheless, with the number of infected cases and death toll from the coronavirus originating from China still rising globally, there appears to be a disconnet between the financial markets and science.

“People are still willing to hang onto equities because they haven’t been scared enough,” said Nate Thooft, global head of asset allocation at Manulife Asset Management.

As an example, Scott Ladner, chief investment officer for Horizon Investments, said that “we don’t think the impact is going to be long-lasting or so severe that there can’t be governmental policies to help blunt the impact”.

In the meantime, though, health authorities are taking the virus outbreak seriously.

“We’re preparing as if this is a pandemic,” said Dr. Nancy Messonnier of the Centers for Disease Control and Prevention.

Wednesday, 5 February 2020

Markets rebound after People's Bank of China injects liquidity into markets

Markets rose on Tuesday.

The S&P 500 jumped 1.5 percent, the STOXX Europe 600 surged 1.6 percent and the Shanghai Composite rose 1.3 percent.

“It’s just the stimulus out of China adding to confidence today,” said Willie Delwiche, investment strategist at Baird, after the People's Bank of China injected 1.7 trillion yuan on Monday and Tuesday to stabilise markets.

Still, with more than 20,000 people in China infected and 465 deaths so far, the coronavirus outbreak is likely to remain a concern for investors.

Tuesday, 4 February 2020

Markets mixed, coronavirus outbreak could yet form “a big enough shock”

Markets were mixed on Monday.

The Shanghai Composite plunged 7.7 percent as the Chinese stock market opened for its first day of trading after the Lunar New Year holiday but the S&P 500 rose 0.7 percent and the STOXX Europe 600 rose 0.3 percent.

Boosting stocks in the US was a report showing that the Institute for Supply Management's manufacturing index rose to a six-month high of 50.9 in January.

Meanwhile, the Markit/Caixin manufacturing PMI for China came in at 51.1 for January at 51.1, down from 51.5 in December.

The coronavirus outbreak in China, though, remains a potential threat.

“Overall, the economic data is still okay, and not likely to change for another month or two,” said Paul Nolte, portfolio manager at Kingsview Asset Management. “Then, we might see some impact of the virus work its way through the data.”

Indeed, Neal Shearing of Capital Economics said that market participants who are looking to the 2002-2003 outbreak of severe acute respiratory syndrome, or SARS, as a guide to how the current situation will unfold may be too sanguine.

“First, given the size and importance of China’s economy, the impact on the global economy is likely to be more significant than in previous epidemics (including SARS),” Shearing wrote. “The steps to contain the virus – rather than the virus itself – are causing most of the economic damage.”

“The SARS virus hit at a time when global stock markets were starting to bottom out following the bursting of the dot-com bubble,” he added. “The potential for the virus to trigger a significant market correction is much greater now than it was back then.”

Similarly, Mohamed El-Erian, the chief economic adviser to Allianz, said the effects of the outbreak are substantial in China and will slow global growth. With the gap between elevated asset prices and weaker economic conditions “increasingly unsustainable”, the outbreak could form “a big enough shock that fundamentally shifts sentiment”.

Monday, 3 February 2020

China's stock market plunges as death toll rises

China's stock market plunged on restarting trading today after an extended Lunar New Year holiday.

While the Chinese stock market was closed, other markets had fallen on concerns over the coronavirus outbreak in China, with the S&P 500 plunging 1.8 percent on Friday to erase gains for the year.

The virus continues to spread, with the death toll hitting 360 in China on Monday, exceeding the country’s death toll from the 2002-03 Sars outbreak. The total number of infections has passed 17,200.

The first death from the virus outside China was reported on Sunday in the Philippines.

Saturday, 1 February 2020

US stocks plunge as Trump declares public health emergency

Markets were mostly lower on Friday.

The S&P 500 plunged 1.8 percent while the STOXX Europe 600 fell 1.1 percent. However, the Nikkei 225 rose 1.0 percent.

Markets fell after US President Donald Trump declared a US public health emergency on Friday in response to the coronavirus outbreak in China.

“It’s certainly the virus concerns,” said Joe Saluzzi, co-head of equity trading at Themis Trading.

However, Chris Gaffney, president at EverBank World Markets, said that “investors should hold tight”, with “some opportunity in some big names as they trade off”, although he cautioned that volatility is likely to remain high until there is a clearer sign of containment of the virus.