Daily market review

United States

US equities gave up early gains to end flat Tuesday, but sentiment remained better as markets noted a slowdown in growth in Chinese coronavirus cases, and a Chinese health official said the epidemic may be peaking. The Dow industrials ended unchanged, the S&P 500 rose 0.2 percent, and the NASDAQ was up 0.1 percent.

Outperforming sectors were real estate, consumer discretionary, materials, and energy as oil prices bounced back. Technology, consumer staples and communications services lagged.

Among companies in the news, Sprint, the telecom, rocketed by 78 percent on news a federal court approved its merger with T-Mobile, which rose 12 percent. Dow, the chemical company, rose 1.3 percent to lead the Dow industrials, while Caterpillar gained 1.4 percent and Intel rose 1.5 percent. Auto Nation surged by 6.3 percent on an earnings beat to lead consumer discretionary shares higher. On the downside, Under Armour, the clothing company, dropped 19 percent after weaker than expected sales and guidance.

In US economic news, Fed Chair Jay Powell repeated that monetary policy is likely to remain on hold. He said the Fed is watching the impact of the coronavirus outbreak, and that downside risks remain despite an improved trade picture. Meanwhile, the NFIB small business optimism index rose more than expected to 104.3, up 1.6 points from December, and reversing most of that month's 2.0 point decline.

These data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose 62 cents to US$53.92, while gold fell US$5.10 to US$1,571.80. The US dollar was weaker against most major currencies except the yen. The US Treasury 30-year bond yield rose 1 basis point to 2.05 percent while the 10-year note yield rose 1 basis points to 1.58 percent.


Risk-on sentiment lifted European equities Tuesday as coronavirus fears eased somewhat. The Europe-wide STOXX 600 rose 0.9 percent, the German DAX both rose 1.0 percent, the French CAC gained 0.7 percent, and the UK FTSE-100 also rose 0.7 percent.

Among other positive developments for equities: the Chinese yuan rose after the People's Bank of China drained some of the emergency liquidity it had injected recently into the banking system. Plus, Beijing announced local fiscal stimulus measures and the early reopening of industrial output in regions not yet hit by the virus.

Companies exposed to China gained the most, including oil & gas, basic resources, telecom, travel & leisure, technology, and banks. Underperformers included food & beverage, media, autos, personal & household goods, and real estate.

Among companies in focus, TUI Group, a huge German travel company, rose 13.1 percent as it cited strong bookings in early 2020, despite an earnings miss. Another big gainer was Fjord1, up 7.9 percent after it announced a Norwegian investment fund was taking a big stake in the Norwegian transport conglomerate. Deutsche Bank rose 2.7 percent as the market reacted positively to the bank's latest restructuring plan.

Asia Pacific

Japanese markets were closed for a national holiday Tuesday, with major markets elsewhere in the region advancing higher, broadly following the lead set by Wall Street on Monday. With the regional data calendar very light, incoming news relating to the coronavirus outbreak was the main focus of investor attention but had little impact on sentiment. Firms in many parts of China have extended closures into the new week and it remains highly uncertain to what extent the outbreak will disrupt economic activity in coming weeks.

Hong Kong's Hang Seng index was the strongest performer in the region, up 1.3 percent on the day, with Hong Kong listed automaker Geely Automobile Holdings Ltd posting strong gains on news it plans to merge with its subsidiary Volvo Cars. The Shanghai Composite index and Australia's All Ordinaries index closed up 0.4 percent and 0.6 percent respectively.

Looking ahead*

On Wednesday in Asia/Pacific, the Reserve Bank of New Zealand policy announcement is due, plus Indian CPI and industrial production data. In Europe, Eurozone industrial production figures are due. In North America, the Fed Chair Jerome Powell will speak, and the US Treasury budget statement is scheduled.

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