Daily market review

United States

US equities retreated Friday from recent highs after a mixed US employment report, and as coronavirus worries returned. The Dow industrials fell 0.9 percent, with both the S&P 500 and NASDAQ down 0.5 percent.

Among sectors, materials, health care and energy fared worst. On the plus side, communication services performed best, with defensive sectors -- utilities, real estate, and consumer staples – also doing well.

Among companies in the news, Wynn, the casino company, fell 5.4 percent as its decent results were overshadowed by the recent closing of its properties in China on virus worries. Columbia Sportswear was off 4.0 percent on disappointing guidance and an analyst downgrade. Take-Two Interactive, a gaming software company dropped 11.9 percent after an earnings beat but revenue miss, and the departure of a key executive.

On the positive side, Lions Gate, the media company, surged 5.2 percent after its quarterly results beat expectations. Uber, the ridesharing leader, rose 9.7 percent on an earnings beat and after raising guidance. Activision Blizzard, the videogame company, rose 2.1 percent after reporting an earnings and revenues beat.

In US economic data, indications of labor market stress from a strong showing for nonfarm payrolls and a rising participation rate were offset by still lifeless average hourly earnings. Nonfarm payrolls rose 225,000 in January to easily exceed Econoday's consensus range with construction surging 44,000. The labor participation rate likewise showed pressure, up 2 tenths to 63.4 percent to also exceed the consensus range. Yet average hourly earnings rose a modest 0.2 percent to miss expectations for 0.3 percent and following only a 0.1 percent rise in December.

These data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil fell US$0.60 to US$54.52, while gold rose US$3.90 to US$1,573.90. The US dollar was higher against most major currencies. The US Treasury 30-year bond yield fell 6 basis points to 2.11 percent while the 10-year note yield fell 6 basis points to 1.58 percent.


Risk-off sentiment returned Friday on renewed coronavirus worries and as traders trimmed positions headed into the weekend. The Europe-wide STOXX 600 eased 0.3 percent, the German DAX fell 0.5 percent, the French CAC was off 0.1 percent, and the UK FTSE-100 declined 0.5 percent.

The death toll from the virus continued to rise and more companies reported extended disruptions in their Chinese operations. Meanwhile, some surprisingly bad European economic reports soured market sentiment. Sectors with heavy China exposure, including autos, basic resources, and luxury goods were among the biggest losers Friday after bouncing back in recent days.

Among companies in focus, Norsk Hydro, the Norwegian miner, dropped 12 percent on a Q4 earnings miss due to falling aluminum prices. Burberry, the UK luxury clothier, slipped 0.1 percent after warning of weakening business due to store closures in China.

In economic news, German goods producers had a disastrous end to 2019. Output slumped 3.5 percent on the month, a much steeper than expected decline and easily more than enough to cancel out November's slightly larger revised advance. Annual growth dropped from minus 2.5 percent to minus 6.7 percent. Separately, French industrial production dropped 2.8 percent on the month for the second worst performance since the global financial crisis. With November's rise also revised away, annual growth slumped from 0.9 percent to minus 3.0 percent, its lowest since May 2014.

Asia Pacific

Major Asian markets were little changed on the day Friday but their performance over the week diverged as investors reacted to a variety of factors, including the coronavirus outbreak, a cut in Chinese tariffs, central bank decisions, and mixed economic data.

The Shanghai Composite index advanced 0.3 percent on the day, continuing its recovery from a sharp drop at the start of the week as trading resumed after the lunar new year holidays. The index still closed the week down 3.4 percent compared with its level before the holidays. Hong Kong's Hang Seng index, in contrast, fell 0.3 percent on the day but outperformed on the week with a gain of 4.1 percent. Japan's Nikkei and Topix indices fell 0.2 and 0.3 percent respectively on the day and advanced 2.7 percent and 2.8 respectively on the week. Australia's All Ordinaries index closed the day down 0.4 percent but was little changed on the week.

The Reserve Bank of Australia published its quarterly Statement on Monetary Policy (SMP) Friday after leaving policy rates on hold at a record low of 0.75 percent at its monthly meeting earlier in the week. Officials last adjusted policy rates in October when they were reduced by 25 basis points. Officials believe that the domestic economy is gaining strength, partly in response to policy easing delivered last year, but revised their near-term and medium-term forecasts slightly lower compared with the last statement published in November.

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