Daily market review

United States

Risk appetite recovered Wednesday as the number of new Chinese coronavirus cases fell for a second day, and on reports of new Chinese economic stimulus ahead, including rate cuts expected Thursday. The Dow industrials rose 0.4 percent, the S&P 500 gained 0.5 percent, and the NASDAQ was up 0.9 percent. Upbeat US economic data added to the positive sentiment.

Reports said Chinese coastal manufacturing cities had loosened restrictions on movement of people and shipping, Other reports said China was likely to bail out its airline industry and other sectors hit by the virus, and would implement corporate tax cuts and benchmark lending rate cuts.

Among sectors in the S&P 500, energy led the gainers on a rebound in crude oil prices, reflecting the risk-on move. Real estate and utilities were the only sectors lower in the broad rally. Technology and financials outperformed, while consumer staples and industrials lagged but still gained.

Among companies in the news, Analog Devices rose 4.5 percent after reporting its business is turning up. Garmin, the navigation device company, rose 6.7 percent on an earnings beat and improved guidance. Agilent Technologies, a diagnostic tech firm, rose 0.6 percent after in-line results.

In US economic data, housing starts posted a far stronger-than-expected annual rate of 1.567 million in January. Adding to the strength is an upward revision to what was already an expansion high in December, now at 1.626 million. Permits followed suit, coming in at 1.551 million that, like starts, exceeded the consensus range. In another strong reading, producer prices rose 0.5 percent in January to easily exceed Econoday's consensus range. Gains were broad-based, as evident in the core readings, up 0.5 percent when excluding food and energy and up 0.4 percent when also excluding trade services.

These data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose US$1.36 to US$59.06, while gold rose US$7.30 to US$1,612.70. The US dollar was mixed against major currencies. The US Treasury 30-year bond yield was flat at 2.01 percent while the 10-year note yield was also unchanged at 1.56 percent.


Risk appetite returned Wednesday on hopes for new Chinese stimulus, and reports of slowing coronavirus infection rates. The Europe-wide STOXX and the German DAX both rose 0.8 percent, the French CAC gained 0.9 percent, and the UK FTSE-100 jumped 1.0 percent.

Tech stocks, including chipmakers that were hit hard after Apple's revenues warning Tuesday, led the rebound Wednesday. In addition to tech, outperformers included personal & household goods, financial services, basic resources, food & beverage, and telecom, all up more than 1 percent. Underperforming were chemicals, banks, insurance, and media.

Among companies in focus, Deutsche Telecom rose 4 percent on an earnings beat. HSBC rebounded 1.3 percent after dropping Tuesday on the market's initial poor response to its restructuring plan. Hapag-Lloyd, the German shipping company, rose 4 percent after topping profits expectations despite reporting a deteriorating shipping environment.

Asia Pacific

Most major Asian markets closed higher Wednesday, recovering some of the heavy losses posted Tuesday. The regional data calendar provided limited guidance to investor sentiment, with uncertainty about the impact of the coronavirus impact on the Chinese economy still high ahead of the scheduled publication mid-March of key official Chinese data for activity over the first two months of the year. Chinese bank lending data for January, initially expected to be released last week, has continued to be delayed. Although the timing of this release each month is often subject to uncertainty, its delay this month may reflect to some extent the impact that the outbreak has had on the Chinese financial system.

Japanese shares outperformed Wednesday after large drops Tuesday, with the Nikkei and Topix indices up 0.9 percent and 0.4 percent respectively after trade data showed a smaller-than-expected fall in exports in January. Hong Kong's Hang Seng index closed up 0.5 percent, while Australia's All Ordinaries index advanced 0.4 percent. After outperforming other regional markets Tuesday, the Shanghai Composite index closed down 0.3 percent Wednesday.

Japanese data published Wednesday showed a smaller-than-expected widening of the trade deficit and weaker machine orders. Japan's merchandise trade deficit widened from ¥152.5 billion in December to ¥1,312.6 billion in January; exports fell 2.6 percent on the year in January after dropping 6.3 percent in December, with demand weak across most major trading partners. Japan's private sector machinery orders (excluding volatile items) fell 12.5 percent in December after increasing 18.0 percent in November, weaker than the consensus forecast for a drop of 9.3 percent.

Australia's wage price index rose 0.5 percent on the quarter in the three months to December, unchanged from the growth recorded in the three months to September, while year-on-year growth in the index was also steady at 2.2 percent

Looking ahead*

On Thursday in Asia/Pacific, the Australia labor force survey report is scheduled. In Europe, German Gfk, German PPI, Swiss merchandise trade, French CPI, UK retail sales, UK CBI trends, Eurozone EC consumer confidence flash, and ECB minutes are all due for release. In North America, US jobless claims, Philadelphia Fed, and US leading indicators reports are scheduled.

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