Daily market review

United States

Risk-off turned to flight to quality Monday as equity markets took fright and US Treasuries rallied on the spread of the coronavirus outside China, especially in Korea, Iran, and Italy. The Dow industrials lost 3.6 percent, the S&P 500 dropped 3.4 percent, and the NASDAQ fell 3.7 percent.

Among sectors in the S&P 500, energy oil prices fell, along with consumer discretionary shares, including luxury goods makers, on worries about Chinese demand, along with airlines and other travel companies. Technology shares fell sharply, as they have led the market higher for years, and appeared ripe for correction on the bad news, with semiconductor makers and hardware companies leading the declines. Defensive shares held up better, including consumer staples, utilities, and real estate, but still sustained losses.

Among companies in the news, Norwegian Cruise Lines fell 9.3 percent after a downgrade to underperform from Bank of America. Meanwhile, Intuit, the financial software company, fell 3.7 percent on reports it may acquire Credit Karma, the credit monitoring company. Wells Fargo, the big bank, slipped 2.7 percent after announcing a settlement with federal regulators after it admitted fraudulent sales practices. On the upside, NGM Pharmaceuticals surged 17.4 percent after announcing positive results in trials for its liver fibrosis drug.

These data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil fell US$2.18 to US$56.25, while gold rose US$12.30 to US$1,660.90. The US dollar was mostly weaker against major currencies. The US Treasury 30-year bond yield declined 8 basis points to 1.84 percent while the 10-year note yield dropped 10 basis points to 1.37 percent.


Coronavirus fears hit equities Monday after weekend headlines highlighted a fast spreading disease outside China, even as new cases inside China appeared to slow. The Europe-wide STOXX fell 3.8 percent, the German DAX declined 4.0 percent, the French CAC 3.9 percent, and the UK FTSE-100 was off 3.3 percent.

Cyclicals sensitive to slowing global growth led the selloff, with miners, chipmakers, banks, energy, and automakers suffering, and airlines hit hardest. Air France was representative, off 8.7 percent, and Lufthansa dropped 7.8 percent. Real estate, telecom, media, and utilities outperformed, but were nevertheless 2 to 3 percent lower in the broad selloff.

In economic data, German business sentiment was little changed, but still stronger than anticipated, in mid-quarter. At 96.1, Ifo's overall climate indicator was only 0.1 point stronger than its minimally upwardly revised January reading and still a couple of ticks short of its level at year-end.

Asia Pacific

Markets were closed in Japan Monday for a national holiday, but opened the week lower elsewhere in the region, in some cases sharply. Renewed alarm about the spread of the coronavirus outbreak was the main impetus for these declines as authorities in Korea, Italy, and Iran all announced a spike in cases and additional measures to combat the outbreak.

Korea's Kospi index was the weakest performer in the region, closing down 3.9 percent on the day, while Australia's All Ordinaries index and Hong Kong's Hang Seng index also posted large declines of 2.3 percent and 1.8 percent respectively. Airline shares sold off particularly sharply across the region. The Shanghai Composite index outperformed, closing down just 0.3 percent.

New Zealand retail trade sales volumes rose 0.7 percent on the quarter in the three months to December, slowing from growth of 1.7 percent in the three months to September. Year-on-year growth in sales volumes also moderated from 4.5 percent in the three months to September to 3.3 percent in the three months to December. The value of sales also grew more slowly on both the quarter and on the year. Weaker headline year-on-year growth was broad-based across several major categories of spending, including supermarket and grocery stores, food and liquor, clothing, footwear and accessories, electrical and electronic goods, and department stores.

Singapore's headline consumer price index advanced 0.8 percent on the year in January, as it did in December, and fell 0.2 percent on the month after increasing 0.3 percent on the month previously. The Monetary Authority of Singapore's preferred measure of core inflation, which excludes the cost of accommodation and private road transport, fell from 0.7 percent in December to 0.3 percent in January, its lowest level since early 2016, with the index flat on the month after increasing 0.4 percent previously. Steady headline inflation in January reflected weaker price gains in some of the smaller categories of spending, offset by steady or stronger inflation in some of the larger categories.

Looking ahead*

On Tuesday in Asia, Hong Kong merchandise trade figures are due. In Europe, German GDP, French business climate, and UK CBI distributive trade reports are due for release. In North America, US Case-Shiller and US FHFA house price data, US consumer confidence, and US Richmond Fed manufacturing reports are scheduled.

Global Stock Market Recap

Global Bond Market Recap

Global Currency Recap

Commodities and currencies