Daily market review

United States

The global equity market rout gathered momentum Tuesday as more cases of the coronavirus were reported in new countries, and worries grow that the disease may not be contained. The Dow industrials dropped 3.1 percent, the S&P 500 fell 3.0 percent, and the NASDAQ lost 2.8 percent.

New cases of the coronavirus were reported in Switzerland, Austria, and South Korea, and US authorities warned that it was only a matter of time before the disease reaches the US.

All sectors in the S&P 500 were down, with energy, industrial, and materials faring worst, while defensive sectors plus communications services held up best.

Among companies in the news, Dow component Home Depot fell 1 percent despite an earnings beat and stronger same-store sales, plus a dividend boost. Intuit, the software company, fell 0.6 on an earnings miss, and as the market continued to react to news it would acquire credit-monitoring company Credit Karma. Macy's fell 4.2 percent on an earnings miss but maintained its 2020 outlook.

In US economic data, an otherwise solid consumer confidence report was headlined, however, by a nearly 3 percentage point rise in jobs-hard-to-get to 14.8 percent in an unfavorable indication for the February employment report. Separately, Case-Shiller home prices firmed in December, rising 0.4 percent on the month for the adjusted 20-city index. The year-on-year rate of 2.9 percent was up 1 tenth from November for the best reading since January last year.

These data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil fell US$1.56 to US$54.69, while gold fell US$12.10 to US$1,648.80. The US dollar was mostly weaker against major currencies. The US Treasury 30-year bond yield declined 3 basis points to 1.81 percent while the 10-year note yield dropped 3 basis points at 1.34 percent.


Equities plunged again Tuesday on more bad news about spreading coronavirus in Europe and elsewhere. The Europe-wide STOXX dropped 1.8 percent while the German DAX, the French CAC, and the UK FTSE-100 all fell 1.9 percent.

An outbreak of the coronavirus in northern Italy has slowed business in Milan and the surrounding region, which has raised the prospect of recession in Italy, and across the Eurozone. Austria and Croatia have also recorded cases. This was in addition to more cases in Korea, Japan, and Iran.

Trade-sensitive sectors – autos & parts, miners, and banks – were among the weakest categories, along with airlines, with Ryan Air off 2.4 percent and Lufthansa down 2.2 percent, to extend big declines from Monday.

Among companies in the news, Bakkafrost, a Norwegian fish farming company, dropped 3.9 percent on an earnings miss. Meggitt, a UK engineering firm, fell 5.2 percent after warning about the impact of Boeing's troubles and the impact of the virus. On the positive side was Prudential Plc, up 0.4 percent on news that a hedge fund had taken a big stake in the UK insurance company.

In economic data, fourth-quarter German growth was unrevised at a zero percent quarterly rate, leaving total output up a workday adjusted 0.4 percent from a year ago following a 0.6 percent gain in the July-September period. At 0.3 percent, unadjusted annual growth also matched its flash estimate, down from 1.1 percent last time. Separately, French manufacturing sentiment was unchanged at 102 in February but higher than expected, courtesy of a big upward revision to the January data

Asia Pacific

Most major Asian markets closed lower Tuesday, with investor concerns about the coronavirus outbreak again the main driver of the price action. After a national holiday Monday, Japanese markets caught up with price declines elsewhere when trading resumed Tuesday, with the Nikkei and Topix indices both closing down 3.3 percent. Australia's All Ordinaries index posted a sharp decline for the second consecutive session, down 1.6 percent, while the Shanghai Composite index fell 0.6 percent. Hong Kong's Hang Seng index stabilised, closing up 0.3 percent, while Korea's Kospi index recovered some ground after dropping sharply Monday, up 1.2 percent.

Hong Kong's data published after the close of regional trading showed a fall in the merchandise trade deficit from HK$32.5 billion in December to HK$30.6 billion in December. Exports slumped 22.7 percent on the year after advancing 3.3 percent previously, while imports also fell sharply, down 16.4 percent after a decrease of 1.9 percent previously. Exports to mainland China fell 21.4 percent on the year, while imports from mainland China fell 25.1 percent. Exports to and imports from the United States and Japan also fell sharply on the year in January.

Today's data are among the first to provide information about the initial economic impact of the coronavirus outbreak but the sharp declines likely reflect to a significant extent the impact of the timing of lunar new year holidays. Officials advise that looking at combined data for January and February would provide a more accurate indication of the strength of trade flows for the first two months of the year. Nevertheless, it is likely that normal fluctuations associated with the holidays have been exacerbated by the outbreak and that this has contributed to the magnitude of the declines in Hong Kong's exports and imports in January, including those to and from mainland China.

Looking ahead*

On Wednesday in Asia, Singapore industrial production figures are due. In North America, the US new home sales report is scheduled.

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