Daily market review

United States

Stocks dropped again Wednesday as the flight from risk assets rolled on, with declines triggering another 15-minute suspension of trading in the US afternoon. Losses accelerated after the suspension but major indexes recovered from the day's lows. The Dow industrials dropped 6.3 percent, the S&P 500 lost 5.2 percent, and the NASDAQ was off 4.7 percent.

The market appeared unimpressed by US plans to cushion the impact of the pandemic by making direct payments to households, with other subsidies and tax benefits, alongside similar efforts from Canada and European countries. Treasury Secretary Steven Mnuchin's comment Tuesday that the US unemployment rate could hit 20 percent in the absence of strong fiscal actions clearly spooked markets, and President Trump sought to downplay that prospect during a press conference Wednesday.

Among sectors, energy, industrials, and financials fared worst with consumer staples holding up best. Communications services and tech also beat the market but were sharply lower. Plunging oil prices took energy stocks down. Among companies in focus, Fedex rose 5.0 percent after withdrawing its guidance on the virus effect, but reporting a revenues beat.

These data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil fell US$2.84 to US$25.87, while gold fell US$38.40 to US$1,494.10. The US dollar rose against major currencies. The US Treasury 30-year bond yield rose 10 basis points to 1.79 percent while the 10-year note yield rose 11 basis points to 1.19 percent.


Flight to quality resumed Wednesday as markets continued to price in dire effects from the spreading coronavirus. The Europe-wide STOXX 600 dropped 3.9 percent, the German DAX lost 5.6 percent, the French CAC dropped 5.9 percent, and the UK FTSE-100 was off 4.1 percent.

The rapid spread of the disease and accompanying shutdowns and hits to businesses overcame the positive impact of huge government relief packages on the way, including likely direct payments to US citizens. Oil and gas stocks were pummeled as oil prices plunged.

Among companies in focus, Airbus dropped 22 percent on fallout from the pandemic. Rolls-Royce was off 11 percent. Carnival, the cruise ship operator, was off 34 percent. Air Partner, a UK airline charter company, dropped 32 percent after withdrawing its guidance on the Covid-19 effect. Centaur Media, a UK media consultancy, fell 35 percent on an earnings miss. Superdry, the UK clothing company, plunged 56 percent after warning of the virus hit to business. Ferratum, a Finnish mobile telephone company, fell 28 percent on poor earnings and its warning on Covid-19. Royal Dutch Shell dropped 11 percent, and BP dropped 10 percent as Brent crude fell 9 percent.

Asia Pacific

Most major Asian markets closed lower Wednesday, sharply in some cases, with gains on Wall Street on Tuesday overshadowed by news of additional cases of coronavirus across the region and further disruption. Australia's All Ordinaries index again underperformed, reversing Wednesday's gains with a drop of 6.3 percent, while Korea's Kospi index and Hong Kong's Hang Seng index fell 4.9 percent and 4.2 percent respectively. The Shanghai Composite index closed down 1.8 percent. Japan's major indices diverged, with the Nikkei down 1.6 percent, but Bank of Japan asset purchases supporting the broader Topix, up 0.2 percent.

The region data calendar was light Wednesday and provided little direction to trading. Japan's merchandise trade balance swung from a deficit of ¥1,313.2 billion in January to a surplus of ¥1,109.8.6 billion in February. Exports fell 1.0 percent on the year in February after dropping 2.6 percent in January, with exports to China, the U.S. and the European Union all falling on the year. Imports fell 14.0 percent on the year after dropping 3.5 percent previously, with this drop in headline growth largely driven by year-on-year declines in imports from China and Hong Kong of almost 50 percent, highlighting the impact on regional supply chains of the coronavirus outbreak in China.

Looking ahead*

On Thursday in Asia/Pacific, New Zealand GDP, Japanese CPI, and Australia labor force reports are due. In Europe, Swiss merchandise trade data and the Swiss National Bank policy announcement is scheduled. In the US, weekly jobless claims, Philadelphia Fed, and leading indicators report are on tap.

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