Daily market review

United States

Equities dropped again Thursday in a volatile flight from risk on the global spread of the coronavirus, with bouts of dip-buying giving way to very heavy selling. Warnings from Microsoft and many other companies, along with talk of recession, added to the selling pressure. Ending at session lows, the Dow industrials and the S&P 500 both plunged 4.4 percent, and the NASDAQ lost 4.6 percent. The weekly loss is 11.1 percent for the Dow and only slightly less severe for the S&P and Nasdaq.

Among sectors, real estate, technology, and energy led the selloff. Health care, industrials, and consumer discretionary stocks outperformed in relative terms, but all sectors fell.

Among companies in the news, Dow component Microsoft fell a whopping 7.1 percent after warning about the negative impact of the virus and disruptions in China. Best Buy, the retailer, lost 4.7 percent after posting an earnings and revenues beat but warning about supply disruptions from China. Crocs, the shoe company, fell 16 percent despite better revenues, after guiding lower on the virus fallout.

Down 2.7 percent, Gilead Sciences said it is in clinical trials for two antiviral drugs which are regarded as possible treatments against the virus. Netflix, the streaming video leader, fell 2.0 percent after relinquishing early gains scored on the thesis that the virus will force people to stay home and watch TV.

In US economic news, durable goods orders fell 0.2 percent in January while ex-transportation orders were up 0.9 percent, but the most important news was a 1.1 percent rise in core capital goods orders (nondefense ex-aircraft) which helped reverse a prior run of weakness for this key measure of business investment. Separately, initial jobless claims rose 8,000 in the February 22 week to a higher-than-expected 219,000 but are still pointing to healthy conditions for the labor market.

These data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil fell US$1.60 to US$51.98, while gold fell US$2.40 to US$1,642.60. The US dollar was mostly weaker against major currencies. The US Treasury 30-year bond yield fell 5 basis points to 1.77 percent while the 10-year note yield declined 6 basis points to 1.27 percent.


Equities plunged again Thursday as the coronavirus spread spurred ongoing flight to quality, and leading companies warned of its impact on business. The Europe-wide STOXX fell 3.8, the German DAX declined 3.2 percent, the French CAC was off 3.3 percent, and the UK FTSE-100 dropped 3.5 percent.

Among sectors, travel & leisure continued to suffer the most, along with basic resources, banks, and energy, while utilities, telecom, health care and real estate held up better as defensive plays. Anheuser Busch, the mega-brewer, fell 7.7 percent after warning on the virus' hit to business, and Standard Chartered, the UK bank with heavy exposure to China and Asia, dropped 3.6 percent after guiding lower.

In economic data, European economic sentiment unexpectedly improved again in February. At 103.5, the EU Commission's gauge (ESI) was up nearly a full point versus its slightly weaker revised December print to record its highest reading since last May. This was the fourth increase in as many months.

Asia Pacific

Major Asian markets posted mixed results Thursday, with uncertainty about the economic impact of the Covid-19 outbreak still the dominant theme. Stronger demand for the Japanese yen put pressure on the shares of major Japanese exporters, with the Nikkei and Topix indices falling 2.1 percent and 2.4 percent respectively. Speculation that the upcoming Tokyo Olympics may be impacted or even cancelled also weighed on investor sentiment.

Australia's All Ordinaries index also posted another sharp decline, closing down 0.8 percent, while Korea's Kospi index fell 1.1 percent after officials at the Bank of Korea kept policy rates on hold, contrary to the consensus forecast for a rate cut. Hong Kong's Hang Seng index and the Shanghai Composite index, however, closed up 0.3 percent and 0.1 percent respectively.

Australia's survey of private capital expenditures shows spending in this category fell 2.8 percent on the quarter for the three months to December after falling 0.4 percent in the prior quarter. This is the fourth consecutive quarterly decline in private capex and the largest since 2016. Spending on building and structures fell 5.9 percent on the quarter, while spending on equipment, plant and machinery rose 0.8 percent. Officials estimate that capital expenditure will increase 2.5 percent in the 2019-20 fiscal year, stronger than the estimate made three months earlier, while the survey's initial estimate for spending in the 2020-21 fiscal year is up around 8.8 percent for the equivalent estimate made for the current fiscal year.

New Zealand's merchandise trade balance swung from a surplus of NZ$384 million in December to a deficit of NZ$340 million in January. Exports to China posted stronger gains in January, but these data cover the period just before travel restrictions were imposed on China in response to the Covid-19 outbreak. Disruption caused by the outbreak could weigh on New Zealand exports in February and following months. Exports of goods increased 8.8 percent on the year in January, picking up from a revised increase of 4.1 percent in December, while imports of goods fell 4.0 percent on the year in January, weaker than a revised drop of 3.0 percent in December.

Looking ahead*

On Friday in Asia/Pacific: Japanese unemployment, industrial production, and retail sales figures are due, plus Indian GDP data. In Europe: UK Nationwide HPI, Swiss retail sales, French manufactured goods consumption, French CPI, French GDP, French PPI, Swiss KOF leading indicator, German unemployment, Italian CPI, and German CPI reports are scheduled. In the US: international trade, personal income and outlays, Chicago PMI, and consumer sentiment data are scheduled. For Canada: monthly and quarterly GDP figures will be posted as well as producer prices.

Global Stock Market Recap

Global Bond Market Recap

Global Currency Recap

Commodities and currencies