Morning Update Note
Wednesday 26th February 2020
- Stocks recorded one of their biggest back-to-back losses on Tuesday as the COVID-19 outbreak rattled investors that fear the impact of the virus is spreading rapidly outside of China. The Centers for Disease Control and Prevention warned Americans to prepare for a coronavirus outbreak and investors attempted to assess the impact of the epidemic in China on global trade and travel.
- The S&P 500 slid 3% to end around 3,128. The Dow Jones Industrial Average shed 879 points, or 3.1%, to finish near 27,082. The Nasdaq Composite retreated 2.8% to end around 8,966. All three major equity indexes are negative year-to-date.
- Investors fear supply line disruptions may hit technology companies dependent on Chinese and South Korean factories in particular. Apple and Facebook have now fallen more than 10% from record highs seen last month.
- In US economic data home prices rose 2.9% compared to a year ago in December, according to the Case-Shiller home price index. That was an acceleration from November’s annual gain, but still moderate by the standards of recent years.
- Consumer confidence, as measured by The Conference Board, was below economists’ expectations in February, but still at a six-month high.
- The Richmond Fed manufacturing index came in weaker than expected for February. The index came to -2, well short of the +10 expected on the Street and the 20 reading in January.
- Speculation has been growing over the potential for a Federal Reserve interest rate cut as worries grow over the effects of the viral outbreak. But Fed Vice Chairman Richard Clarida said on Tuesday afternoon that it was still too soon to tell what the impact might be, while adding that central bank will “respond accordingly.
- Mastercard shares slid 6.7% after the company said the COVID-19 outbreak would dent sales.
- Shares of United Airlines Holdings fell 6.5% after the company rescinded its annual guidance on coronavirus concerns.
- American Express shares led the Dow lower, followed by Dow, United Technologies and Visa.
- An early bounce petered out quickly with traders worried that the coronavirus could yet turn into a global pandemic, leaving share prices vulnerable as economic growth forecasts are marked down.
- The pan-European Stoxx 600 fell 1.76% to 404, alongside a 1.88% drop for the German Dax to 12,790, while the FTSE Mibtel was off by 1.44% at 23,090. The FTSE 100 was down 1.94% at 7,017 and the FTSE 250 was off 1.90% to 20,715.
- Spanish stocks fared worst after around 1,000 guests at a resort in Tenerife were placed under lockdown, after a travelling Italian doctor tested positive for coronavirus and a woman in Catalonia who had visited northern Italy was diagnosed as the country’s fifth virus case.
- Lenders’ shares were among the worst hit on the Stoxx 600, with a gauge tracking the sector retreating by 2.55% amid expectations of further interest rate cuts by the European Central Bank, and Travel&Leisure shares were 1.78% lower. Analysts looking at the wider effects of the outbreak in Italy suggested that a rate cut from the European Central Bank was now far likelier.
- Cruise line operator Carnival was the worst performer on the Stoxx 600 amid the ongoing virus fears.
- Shares of Commerzbank were near the bottom of the pile as well, alongside declines in BNP Paribas, Natixis, and Legal&General.
- Construction products supplier SIG was the biggest faller on the FTSE 250, after it told shareholders that full-year results were expected to be in line with guidance, with underlying pre-tax profits of roughly €42m.
- Arkema was a top riser after a US district judge delayed opening arguments in a criminal trial against the chemicals group because the prosecution had not disclosed some of the evidence supporting its case.
- Elsewhere on the economic side of things, German gross domestic product was flat over the fourth quarter in comparison to the previous three-month stretch, as expected.
- In year-on-year terms, the rate of growth in German GDP slipped from 0.6% to 0.4%, which was also as anticipated.
- Asian markets declined in early trading on Wednesday following another sharp selloff on Wall Street as the global spread of the coronavirus outbreak continued to rattle traders.
- Japan’s Nikkei sank 0.7%, and Hong Kong’s Hang Seng Index dipped 0.5%. The Shanghai Composite edged up 0.3%, while the smaller-cap Shenzhen Composite fell 0.8%. South Korea’s Kospi retreated 1%. Stocks ticked up in Malaysia, but fell in Taiwan, Singapore and Indonesia. Australia’s S&P/ASX 200 tumbled 2.3%.
- Among individual stocks, SoftBank, Sony and Inpex dropped in Tokyo trading. In Hong Kong, AAC and Sunny Optical fell, along with China Mobile. Samsung declined in South Korea, while Beach Energy and Rio Tinto fell in Australia.
- Consumer confidence reached a six-month low on the Korean peninsula, according to fresh data released on Tuesday.
10yr and 30yr US treasuries are currently trading at 1.36% and 1.84% respectively.
10yr UK gilts trade with a yield of 0.503%.
German 10yr bund yields trade at -0.50%.
10yr Italian and Spanish bond yields trade at 1.01% and 0.225% respectively.
The WTI crude oil price is $49.73
Brent crude is $54.62
The gold price is $1,644.93
The silver price is $18.10
The COMEX copper price is $2.57
The Yen is trading at 110.49 against the US dollar.
The pound is trading at 1.30 against the US dollar.
The pound is trading at 1.19 against the Euro.
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