Daily market review

United States

US stocks ended nearly flat Wednesday with mixed earnings in focus, including an earnings beats from Apple, but coronavirus headlines keeping a lid on markets. The Dow industrials rose 0.04 percent, the S&P 500 eased 0.1 percent, and the NASDAQ rose 0.1 percent.

The Federal Reserve's policy announcement left policy on hold as expected, and gave markets the sense that the bar is high for any change ahead.

Among sectors, industrials fared best, following positive results from Boeing, General Electric, and railway Norfolk Southern. Tech shares got a lift from Apple, which rose 2.1 percent on strong results. Materials outperformed, led by precious metals and chemicals. Strength in restaurant shares, especially McDonalds which rose 1.9 percent on positive earnings, gave consumer discretionary shares a boost. Laggards included consumer staples, and communications services, especially telecoms on disappointing AT&T results. Energy stocks got whacked again by falling oil prices. Among companies suffering earnings disappointments: Starbucks fell 2.1 percent and Advanced Micro Devices was off 6.0 percent.

In US economic data, net exports probably won't be contributing as much to fourth-quarter GDP as expected given December's unexpectedly wide $68.3 billion deficit in goods trade, which compared with Econoday's consensus for a $66.9 billion deficit. Yet the widening followed very favorable levels in both November, at a revised $63.0 billion, and October at $66.7 billion. Separately, just when the outlook for housing was turning up, a leading indicator for resales has turned sharply lower. The pending home sales index fell an unexpected 4.9 percent in December versus Econoday's consensus for a 0.4 percent gain, with all regions down in the month.

These data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil was unchanged at US$59.66, while gold rose US$7.40 to US$1,581.60. The US dollar was mixed against major currencies. The US Treasury 30-year bond yield fell 6 basis points to 2.05 percent while the 10-year note yield fell 6 basis points to 1.58 percent.


European equities edged up Wednesday with financials leading on upbeat earnings, but gains were limited by worries about the spreading Chinese coronavirus. The Europe-wide STOXX 600 rose 0.4 percent, the German DAX firmed 0.2 percent, the French CAC gained 0.5 percent, and the UK FTSE-100 edged up 0.04 percent.

Among sectors, industrials, real estate, and financial services led the winners, while media, oil & gas, and household staples lagged. SEB, the Swedish bank, rose 1.9 percent, and Banco Santander, the Spanish bank, rose 4.4 percent on expectations ahead of earnings. Novartis, the big Swiss pharma, rose 1.2 after strong results and raising its guidance. On the downside, LVMH, the luxury retailer, declined 1.1 percent on an earnings miss, though its chairman downplayed the likely impact of the Chinese coronavirus.

In economic news, German consumer sentiment proved surprisingly robust at the start of the year. GfK's consumer climate indicator was revised up a notch to a final 9.7 in January and is seen improving further to a solid 9.9 in February. If confirmed, the February reading would be an 8-month high. In a separate report, UK house prices began the year on a decent footing as January prices climbed a surprisingly steep 0.5 percent on the month, their fourth advance in a row.

Asia Pacific

Chinese markets were again closed Wednesday for the lunar new year holidays while Hong Kong's Hang Seng index, where trading resumed after the new year break, caught up with declines recorded elsewhere earlier in the week, falling 2.8 percent on the day. Travel-related shares were among the weakest performers, reflecting ongoing concerns about the impact of the coronavirus outbreak. Other markets in the region posted moderate gains Wednesday, with Japan's Nikkei and Topix indices up 0.7 percent and 0.5 percent on the day, and Australia's All Ordinaries index advancing 0.5 percent.

Australia's headline consumer price index increased 1.8 percent on the year in the three months to December, up slightly from 1.7 percent in the three months to September, just above the consensus forecast of 1.7 percent and closer to the Reserve Bank of Australia's target range of 2.0 percent to 3.0 percent. Measures of core inflation were steady in the three months to December. The small increase in headline inflation was broadly in line with the assessment made by RBA officials at their most recent policy meeting early December. Officials then forecast that inflation would pick up gradually and be close to 2.0 percent in 2020 and 2021 in both headline and underlying terms. Officials will hold their first policy meeting for 2020 and publish updated economic forecasts next week.

Looking ahead*

On Thursday in Asia/Pacific, merchandise trade data from both New Zealand and Hong Kong are scheduled. In Europe, the following are scheduled: KOF Swiss Leading Indicator, German unemployment rate and CPI reports, Eurozone unemployment rate and EC economic sentiment, plus the Bank of England will make its monetary policy announcement and release its monetary policy report. In North America, the first estimate of fourth-quarter GDP will be released as will jobless claims figures.

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