Key Events
U.S. futures and European equities slipped lower after Asian stocks dropped to a seven-week low as the coronavirus outbreak appears to have accelerated. According to reports, more than 7,700 people, primarily in China have now been infected, with 170 deaths reported thus far.
The pandemic is already impacting China’s economy. Mainland markets remain closed even after the Lunar New Year holiday ended.
As well, global companies with a presence in China, such as Starbucks (NASDAQ:SBUX) and Toyota (NYSE:TM), have closed their local facilities—at least until the epidemic appears to be contained. Financial institutions have begun cutting their outlook on China growth; sharp monetary stimulus is now expected from Chinese policymakers.
Treasurys and global sovereign bonds extended their rally. Gold moved higher.
Global Financial Affairs
Contracts for the S&P 500, Dow Jones and NASDAQ are all flashing red, signaling a softer U.S. open on the heels of a two-day rally.
SPX futures fell slightly, descending back below the uptrend line since the October bottom.
All 19 sectors of the STOXX Europe 600 Index have dragged the benchmark lower after its gap-down open this morning.
Rising risk aversion resulted in a bloodbath during the Asian session. Hong Kong’s Hang Seng lost more than 2% for the second straight day, while the Taiwan Weighted Index plunged 5.75%, as markets reopened after a holiday and played catchup with global indices.
Yesterday, U.S. stocks closed well off their highs, after paring much of a second-day rally, with U.S. tech giants painting a mixed picture after hours. While Microsoft (NASDAQ:MSFT) and Tesla (NASDAQ:TSLA) beat on expectations, Facebook (NASDAQ:FB) disappointed, triggering an almost 7% selloff in after-hours trading.
Also, pressuring the market: bets on the increasing possibility of a Fed funds rate cut in the latter part of 2020, after the central bank signaled disappointment in inflation and consumer spending.
Yields, including for the U.S. 10-yearTreasury note, plunged to the lowest since Oct. 8, potentially targeting the 1.500 level.
The dollar closed well off its highs yesterday, a second straight day.
It's fluctuating today, potentially ending a five-day rally. A return to the falling channel would constitute a buying opportunity.
Oil returned to declines, to the lowest level since Aug. 7. A fall below the $50 level would suggest an additional drop. Coronavirus fears continue to pummel the commodity lower.
Up Ahead
- Amazon (NASDAQ:AMZN), International Paper (NYSE:IP) and Unilever (NYSE:UN) all report on Thursday. Energy supermajors Chevron (NYSE:CVX) and Exxon Mobil (NYSE:XOM), as well as Caterpillar (NYSE:CAT) and South Korean chipmaker SK Hynix (KS:000660) release results on Friday.
- The U.S. reports fourth quarter GDP later today.
- The U.K. is scheduled to leave the European Union Friday.
Market Moves
Stocks
Currencies
- The Dollar Index was little changed.
- The euro advanced 0.1% to $1.1017.
- The British pound fell 0.1% to $1.3002.
- The onshore yuan fell 0.4% to 6.937 per dollar.
- The Japanese yen gained 0.1% to 108.88 per dollar.