Daily market review

United States

Equities dropped again Tuesday as gloom surrounding fallout from the coronavirus swamped the positive impact of an emergency 50-basis-point Fed rate cut. Many traders sold into the bounce, and demand for safe assets briefly pushed US 10-year yields below 1 percent for the first time. The Dow industrials fell 3.0 percent, the S&P 500 lost 2.8 percent, and the NASDAQ fell 3.0 percent.

Financials were among the worst performers as interest rates dropped, with Silicon Valley Bank off 8.4 percent and online broker Charles Schwab down 8.8 percent. Package deliverers Fedex (down 4.8 percent) and UPS (down 1.6 percent) both warned of the coronavirus hit to business. Tech and energy stocks also lagged. Utilities and real estate, as defensive plays, fared better.

Among companies in the news, big retailer Target fell 3.0 percent in the market downdraft despite earnings and revenues beats and in-line guidance. Credit card company Visa fell 3.4 percent after cutting its guidance and citing uncertainty around the impact of the coronavirus. Semiconductor maker Microchip Technology fell 6.1 percent after cutting its guidance due to the coronavirus.

These data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil fell 41 cents to US$52.02, while gold jumped US$47.10 to US$1,639.10. The US dollar weakened against major currencies. The US Treasury 30-year bond yield fell 9 basis points to 1.63 percent while the 10-year note yield dropped 15 basis points to 1.01 percent.


Hopes for concerted G7 stimulus and the Fed's emergency rate cut lifted European equities Tuesday but major indexes gave up about half of their gains by the close. The Europe-wide STOXX 600 ended up 1.4 percent, the German DAX and the French CAC both rose 1.1 percent, and the UK FTSE-100 gained 1.0 percent.

Markets initially reacted with disappointment after a G7 statement lacked specific hoped-for action to fight the coronavirus' economic impact, and later, the initial positive response to the Fed's 50-basis point rate cut fizzled. Some market participants were spooked by the Fed's dramatic action rather than feeling reassured.

Among sectors, winners were real estate, financial services, construction, industrials, and basic resources, while the worst laggards included banks, autos, telecom, and insurance. In M&A news, Qiagen, a Dutch diagnostics company, rose 15 percent on news it would be acquired by Thermo Fisher, a US scientific instruments company, which rose about 1 percent. Meanwhile, Huntsworth, a UK PR firm, gained 53 percent on news it would be acquired by US private equity firm Clayton, Dubilier & Rice.

In economic data, inflation across the Eurozone provisionally decelerated in February. At 1.2 percent, the flash annual rate was down from January's final 1.4 percent and in line with expectations. Separately, UK construction had a surprisingly good February according to latest sector PMI survey. At 52.6, the headline index was up more than 4 points versus its January reading and back above the 50-expansion threshold for the first time since April 2019

Asia Pacific

Major Asian markets posted mixed results Tuesday, falling well short of the strong gains made on Wall Street on Monday. Concerns about the spread and impact of the coronavirus outbreak again weighed on sentiment, despite further moves by global central banks to provide support to economic activity.

Japan's Nikkei and Topix indices underperformed, falling 1.2 percent and 1.4 percent respectively, after the World Health Organisation included Japan as one of the four countries most impacted by the outbreak. Hong Kong's Hang Seng index was flat on the day, while the Shanghai Composite index advanced 0.7 percent. Australia's All Ordinaries index closed up 0.8 percent but lost some of the gains made earlier in the day after officials at the Reserve Bank of Australia cut policy rates late in the trading session.

The RBA cut its policy rate by 25 basis points to a new record low of 0.50 percent, contrary to the consensus forecast for no change. Officials explicitly cited the need to support the economy in response to the outbreak as the reason for this decision, noting that it had both "clouded" the global outlook and was already having a "significant effect" on the domestic economy. Although officials caution that is difficult to predict at present how large and long-lasting the effect will be, they judge that the outbreak is likely to delay progress towards their employment and inflation goals, and that this warranted the immediate easing of policy. Although policy rates are now very close to zero, officials advise that they are prepared to ease monetary policy further in coming months if necessary.

Looking ahead*

On Wednesday in Asia/Pacific, China, Japan and Singapore PMI composite and services reports, and the Australia GDP report are due. In Europe, German retail sales, Swiss CPI, French, German, Eurozone PMI composite reports, Italian GDP, UK services PMI, and Eurozone retail sales reports are scheduled. In North America, the Bank of Canada policy announcement, the US ISM nonmanufacturing report, and the Fed beige book are on tap.

Global Stock Market Recap

Global Bond Market Recap

Global Currency Recap

Commodities and currencies