Daily market review

United States

Equities retreated again late Wednesday as markets reacted to reports of authorities monitoring possible Covid-19 infections in the New York area. The Dow was also depressed by weakness in Walt Disney on news of a management change. Earlier, markets rose slightly as they appeared to be coming to grips with reports of a much wider spread of the Covid-19 virus. At the close, the Dow industrials fell 0.5 percent, the S&P 500 declined 0.4 percent, and the NASDAQ rose 0.2 percent.

Among sectors, tech and materials outperformed, as buyers found some bargains in sectors that have led recent declines on virus worries, including Apple which rose 1.6 percent. Communications services, consumer discretionary, financials, and energy lagged, as oil prices dropped again.

Among companies in the news, Walt Disney, a Dow component, slipped by 3.7 percent on surprise news that CEO Bob Iger would step down. The selloff occurred despite news of earnings and revenues that beat market expectations. Salesforce.com, the sales software company, fell 1.3 percent on news of a management shakeup, despite an earnings beat. Retailer Lowes fell 4.4 percent on earnings and revenue misses. On the upside, retailer TJX rose 7.3 percent after earnings and same-store sales beats, and a dividend increase.

In US economic data, new home sales, at an annual rate of 764,000, surged 7.9 percent in January to post a 13-year high and far exceed Econoday's consensus range. And the sales surge did not come at the expense of discounting, as the median price jumped 7.4 percent to a record $348,200 for year-on-year growth of 14.0 percent.

These data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil fell US$1.11 to US$53.58, while gold fell US$3.80 to US$1,645.00. The US dollar was mostly higher against major currencies. The US Treasury 30-year bond yield rose 1 basis points to 1.82 percent while the 10-year note yield declined 1 basis point to 1.33 percent.


Equities ended mostly flat Wednesday as selling pressure eased, at least temporarily, despite reports of new Covid-19 cases in many countries. The Europe-wide STOXX ended unchanged, the German DAX eased 0.1 percent, the French CAC rose 0.1 percent, and the UK FTSE-100 rose 0.4 percent.

Among sectors, autos & parts, utilities, technology, and banks, health care, and construction & materials bounced back, while laggards included travel & leisure, real estate, telecom, and food & beverages. Among companies in focus, Diageo, the drinks multinational, fell 1.8 percent on worries about falling Chinese demand.

Asia Pacific

Major Asian markets continued the global sell-off Wednesday as investor concerns about the economic impact of the coronavirus outbreak intensified, though declines were more limited than those seen on Wall Street Tuesday.

Australia's All Ordinaries index was the weakest regional performer, down 2.3 percent on the day, with shares of major banks dropping sharply. Japan's Nikkei and Topix indices both fell 0.8 percent, while the Shanghai Composite index and Hong Kong's Hang Seng index fell 0.8 percent and 0.7 percent respectively. Countries in Asia have began to impose restrictions on travel from Korea as the number of cases and fatalities there continue to rise, while Hong Kong's government announced substantial fiscal stimulus to help offset ongoing weakness in its domestic economy.

Revised data showed Hong Kong's economy contracted in the three months to December, with GDP falling by a seasonally adjusted 0.3 percent on the quarter. This is little changed from the initial estimate that GDP fell 0.4 percent on the quarter and confirms a significant improvement from the three months to September, when GDP contracted by 3.0 percent. Today's GDP data coincided with the presentation of the Hong Kong government's annual budget. Financial Secretary Paul Chan noted that the near-term outlook for Hong Kong's economy is extremely challenging and that the likelihood of it contracting again in 2020 has increased "notably", citing the coronavirus outbreak and ongoing civil unrest as two serious downside risks. Based on this assessment he announced several fiscal stimulus measures aimed at providing support to local residents and businesses and forecast a fiscal deficit for the first time in 15 years worth around 1.3 percent of GDP.

Singapore's industrial output advanced 3.4 percent on the year in January, rebounding from a decline of 3.7 percent in December. Stronger headline growth was largely driven by an outsized gain in production in the biomedical industry, an industry often subject to high volatility. Excluding the biomedical industry, manufacturing output fell 3.8 percent on the year in January after dropping 4.4 percent in December; and although underlying growth in production was still weak in January, as it had been in prior months, the relative stability in the year-on-year growth rate suggests that the coronavirus outbreak had relatively limited impact on the Singapore industrial sector in January, though February data will likely show a greater impact.

Looking ahead*

On Thursday in Asia/Pacific, Australia new capital expenditure and New Zealand merchandise trade figures are due. In Europe, Eurozone money supply, Italian business and consumer confidence, and Eurozone EC economic sentiment reports are scheduled. In the US, durable goods, GDP, jobless claims, and pending home sales data are scheduled.

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