Daily market review

United States

Global risk-off sentiment dominated markets again Monday as China reported more coronavirus cases and deaths, and authorities announced closings and other containment measures intended to stem the pandemic, but also expected to slow the economy. The Dow industrials and the S&P 500 both fell 1.6 percent, while the NASDAQ dropped 1.9 percent.

The unfolding of the Senate's impeachment trial also was in play on reported claims by John Bolton, President Trump's former national security advisor, that US military aid for Ukraine was directly tied to requests for investigations into Democratic rivals. Trump denied Bolton's reported allegations.

Among sectors, energy fared worst as crude oil prices fell on an expected decline in demand due to Chinese weakness. Technology shares were hit hard, led by semiconductors and hardware makers. Materials lagged, along with industrials. Communications services were also off sharply, with entertainment and media the worst hit. Financials were off in line with the main averages, along with consumer discretionary stocks. Outperformers included consumer staples and health care.

Big momentum stocks were big losers including Apple off 2.9 percent, Microsoft down 1.7 percent and Amazon off 1.8 percent, as the market continued to correct from recent highs.

Among companies in the news, D.R. Horton, the builder, rose 2.0 percent after earnings and revenues beat estimates and after raising guidance. On the downside, Sprint fell 4.4 percent after missing on earnings and revenues. Google fell 2.3 percent on reports state attorneys general would coordinate with the Justice Department as they investigate the search engine leader. Yum, the fast food company, was off 0.6 percent after closing many of its stores in China. Wynn Resorts, a big casino player in China, was a notable loser, down 8.1 percent.

In US economic data, new home sales were not as robust as expected. December's annual sales rate of 694,000 was below Econoday's consensus range but still within a narrow six-month channel that has marked a ratcheting higher for this series. The 3-month average, at 699,000, is only just above December's total and down only 10,000 and 14,000 from the averages in November and October, which are the expansion highs.

These data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil fell US$1.68 to US$59.14, while gold rose US$9.90 to US$1,587.30. The US dollar was mixed against major currencies but weaker versus the yen and Swiss franc, both safe-haven currencies. The US Treasury 30-year bond yield fell 8 basis points to 2.06 percent while the 10-year note yield dropped 9 basis points to 1.60 percent.


Risk-off sentiment knocked down European equities across the board Monday on worries over the impact of the Chinese coronavirus pandemic. The Europe-wide STOXX 600 dropped 2.3 percent, the German DAX plunged 2.8 percent, the French CAC lost 2.7 percent, and the UK FTSE-100 was off 2.3 percent.

Worst hit were basic resources, autos, chemicals, industrials, and travel & leisure amid concern over a major slowdown in China's economy, which accounts for a significant share of global growth. Utilities, health care, and food & beverage shares outperformed, but were still sharply lower. On the downside, French luxury retailers with exposure to the Chinese market were hit hard, including LVMH, off 3.7 percent, and Kering, down 3.6 percent. Among mining shares, Glencore was off 4.0 percent, and ArcellorMittal, the big steel company, fell 2.6 percent.

In economic news, Ifo's German January business sentiment survey was mixed to soft. The overall climate indicator fell 0.4 points to 95.9, only its first decline since last August and just a 2-month low but still well short of the market consensus. The drop was due to expectations, which were down a full point at 92.9. By contrast, current conditions actually improved slightly. A 0.3 point rise to 99.1 was the third increase in a row and the strongest reading since July.

Asia Pacific

Most major Asian markets were closed Monday for new year holidays and other national holidays, including China, Hong Kong, Australia, Singapore, Taiwan, and Korea. Markets were open in Japan and sold off heavily, with the Nikkei and Topix indices closing down 2.0 percent and 1.6 percent respectively.

With the regional data calendar clear, investors' attention was focused on news relating to the coronavirus outbreak and the potential impact this will have on the Chinese economy in coming months. Ahead of the start of the global trading week, Chinese authorities announced that the number of confirmed cases was more than 2,700 and the death toll had reached 80, with suspected and confirmed cases also reported in several other countries in the region and further afield.

Looking ahead*

On Tuesday in Europe, the following are scheduled: Swiss merchandise trade and UK CBI distributive trades reports. In North America, US durable goods, S&P Corelogic Case-Shiller house price index, US consumer confidence, and Richmond Fed manufacturing figures will be released.

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