Daily market review

United States

Equities dropped again Wednesday after the World Health Organization declared a global pandemic and amid disappointment over US inaction to bolster the economy and inability to stem the spread of the disease. The Dow industrials fell 5.9 percent, the S&P 500 fell 4.9 percent, and the NASDAQ lost 4.7 percent.

Expectations for fiscal measures faded after Congress rejected Trump administration proposals to cut payroll taxes, and after President Trump failed to appear as promised late Tuesday to unveil other stimulative measures. Markets reacted badly to rising closures and to companies withdrawing guidance due to the virus. Energy stocks were hit and the market turmoil increased on the renewed selloff in oil prices after Saudi Arabia boosted production, as threatened earlier in the week.

Among sectors, the worst performers were industrials, real estate, consumer staples, materials, consumer discretionary, and energy. Technology, financials, and health care outperformed, but all were sharply lower given the scale of the down move.

Among companies in focus, American Airlines fell 4.4 percent after it was downgraded by Evercore ISI. Moody's declined 7.1 percent after the ratings agency guided lower due to the virus. Hilton Worldwide, the hotel company, declined 10.2 percent after withdrawing its guidance in light of the coronavirus and related travel restrictions and cancellations. In M&A news, Pepsi slipped 3.3 percent after announcing a deal to buy Rockstar Energy Beverages to capitalize on the energy drink fad.

In economic news, US consumer inflation remained moderate as expected in February, up 0.1 percent on the month and up 2.3 percent on the year. Core inflation (less food and energy) was up 2.4 percent on the year and 0.2 percent on the month.

These data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil fell US$2.09 to US$35.72 while gold fell US$7.60 to US$1,642.40. The US dollar rose slightly most major currencies. The US Treasury 30-year bond yield rose 9 basis points to 1.37 percent while the 10-year note yield rose 4 basis points to 0.85 percent.


Equities ended weaker after giving up early gains as coronavirus fears and a weak Wall Street open overcame the positive impact of a Bank of England rate cut. The Europe-wide STOXX 600 fell 0.7 percent, the German DAX fell 0.4 percent, the French CAC lost 0.6 percent, and the UK FTSE-100 was off 1.4 percent.

Another oil price plunge hit energy stocks, including UK supermajors Royal Dutch Shell, off 2.7 percent, and BP, off 3.6 percent. Travel & leisure stocks resumed their selloff, with UK movie theater company Cineworld off 8 percent.

Among sectors: banks, chemicals, autos & parts, and health care outperformed, while lagging were travel & leisure, retails, oil & gas, personal & household goods, and media.

In economic news, the UK economy underperformed expectations in January. Real GDP was flat on the month, short of consensus, and down from an unrevised 0.3 percent gain in December. This left 3-monthly growth at 0.0 percent and halved the annual rate to 0.6 percent.

Asia Pacific

Major Asian markets sold off further Wednesday, with fiscal stimulus packages announced by regional governments and the Bank of England's emergency rate cut not enough to outweigh renewed concern about the spread of the coronavirus outbreak, particularly in Italy. Japan's government has promised a second fiscal package worth around US$4 billion to support businesses most impacted by the outbreak, while Australia's government has allocated an additional A$1.5 billion to support health programs, but investor sentiment across the region remain bleak.

Australia's All Ordinaries index was again the weakest regional performer, with another 3.4 percent drop Tuesday, and is now around 20 percent below its recent peak. Japan's Nikkei and Topix indices also posted heavy falls again, down 2.3 percent and 1.5 percent respectively. The Shanghai Composite index and Hong Kong's Hang Seng index performed better but still closed down 0.9 percent and 0.6 percent on the day.

The regional data calendar was light Wednesday, with Chinese bank lending data published after the close of local trading. Total new yuan loans made by Chinese banks in February amounted to CNY905.7 billion, down from CNY3,340 billion in January, but broadly in line with the normal seasonal pattern. Chinese banks typically front-load much of their annual lending quotas at the start of the year. Aggregate financing to the economy also fell, from CNY5,070 billion to CNY855 billion. Total outstanding loans rose by 12.1 percent on the year at the end of February, unchanged from the rate at the end of January.

Looking ahead*

On Thursday in Asia, Japanese PPI figures are due. In Europe, Italian unemployment and Eurozone industrial production figures are scheduled, plus the ECB will make its policy announcement. In the US, US jobless claims and PPI reports are on tap.

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