Daily market review

United States

US stocks continued to rebound across the board Tuesday on Chinese stimulus measures and a sense that losses on virus fears had been overdone. The Dow industrials rose 1.4 percent, the S&P 500 gained 1.5 percent, and the NASDAQ rose 2.1 percent.

Risk appetite was bolstered by news of huge Chinese injections of liquidity into financial markets, and expectations for Chinese rate cuts and lower bank reserve requirements.

Among sectors, technology led the way higher, with Apple (up 3.3 percent) and its suppliers surging on reports their Chinese production would resume full-steam this month. Materials outperformed with support from chemicals. Health care was strong, with good gains in biotech. Consumer discretionary stocks rose with autos up on Tesla's continued rally after analyst upgrades. Underperforming but still higher were consumer staples, along with communications, with Google off 2.6 percent on disappointing quarterly revenue results. Utilities were the only actual losing sector.

Among other companies in the news, Clorox rose 5 percent on an earnings and revenues beat, and stable guidance. Ralph Lauren shares rallied 9.2 percent on earnings and revenues beats and better guidance. ICE, owner of the New York Stock Exchange, dropped 7.6 percent on news it may bid for eBay.

In US economic data, factory orders jumped by 1.8 percent in December in a report that was skewed higher by defense aircraft and was otherwise mixed. The split between the report's two main components shows a 1.1 percent rise for nondurable goods -- the new data in today's report -- and a 2.4 percent rise for durable orders previously reported.

These data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil fell 23 cents to US$54.07, while gold fell US$26.79 to US$1,554.31. The US dollar was mixed against major currencies. The US Treasury 30-year bond yield rose 7 basis points to 2.07 percent while the 10-year note yield rose 6 basis points to 1.59 percent.


European equities surged Tuesday as upbeat earnings and Chinese stimulus measures restored risk appetite. The Europe-wide STOXX 600 rose 1.6 percent, the German DAX and French CAC both surged 1.8 percent, and the UK FTSE-100 gained 1.6 percent.

Among sectors in the STOXXX 600, outperformers included basic resources, oil & gas, technology, chemicals, industrials, and banks, while laggards included defensive sectors such as utilities, telecom, and real estate. British Petroleum rose 4.2 percent after an earnings beat, while miner Glencore rose 5.1 percent as it maintained its 2020 earnings guidance.

Among companies in focus, Ambu, a Danish medical equipment maker, jumped by 24 percent on a big revenues beat. On the downside, UK tech company Micro Focus dropped 22 percent after a big earnings miss.

Asia Pacific

Major Asian markets closed higher Tuesday, recovering from the sharp falls recorded Monday as Chinese markets re-opened after the lunar new year holidays. The Shanghai Composite index closed up 1.3 percent, still well below levels seen before the coronavirus outbreak but indicating that sentiment may be stabilising. Hong Kong's Hang Seng index posted a similar gain of 1.2 percent despite news of the first coronavirus-related fatality in Hong Kong. Japan's Nikkei and Topix indices closed up 0.5 percent and 0.7 percent respectively, while Australia's All Ordinaries index advanced 0.4 percent.

The Reserve Bank of Australia left its policy rate unchanged at a record low of 0.75 percent at its meeting Tuesday, in line with the consensus forecast. This follows cuts of 25 basis point rates at the RBA's meetings in May, June, and October last year. Officials noted that the outlook for the global economy remains "reasonable" and argued that there have been signs that the slowdown in global growth that started in 2018 is coming to an end, despite risks such as ongoing trade disputes and the coronavirus outbreak. Officials forecast economic growth to pick up to around 2.75 percent in 2020 and 3.0 percent in 2021, with activity supported by a number of factors, including low interest rates, recent tax cuts, and higher infrastructure spending, but also noted that recent wildfires and the potential impact of the coronavirus outbreak represent downside risks to growth.

Looking ahead*

On Wednesday in Asia/Pacific, Japanese PMI composite, Singapore PMI, and China general services PMI reports are due. In Europe, the following are scheduled: Swiss SECO consumer climate; French, German, Eurozone, and UK PMI composite reports, plus Eurozone retail sales data. In North America, US ADP employment, US international trade, and US non-manufacturing ISM figures will be released, plus the Canadian merchandise trade report.

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