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On 31 January 2020 - US, Europe, Asia drop on coronavirus, weak economic data

Anne D Picker

Anne D Picker - Econoday

Poor earnings add to malaise.

US markets

US stocks fell Friday on risk-off sentiment amid rising coronavirus worries, poor earnings, weak economic data, and unease around the Senate impeachment trial. The Dow industrials fell 2.1 percent, the S&P 500 fell 1.8 percent, and the NASDAQ was off 1.6 percent.

Most sectors were down, with industrials, technology, and energy stocks off the most, while US Treasuries gained in the risk-off move. Airlines tumbled anew after news that some US airlines had suspended flights to China. Exxon Mobil, off 4.1 percent, and Chevron, off 3.9 percent, were hit hard by declining oil prices. Dow member Caterpillar fell 4.1 percent on disappointing earnings. On the positive side, a rally in Amazon, up 7.3 percent on an earnings beat, lifted consumer discretionary stocks.

In US economic data, consumer data eased at year end, no surprise following yesterday's fourth-quarter GDP report that showed only a modest rate for consumer spending. Consumer spending for December in this report, which was bundled into yesterday's GDP data, rose an as-expected 0.3 percent. Personal income in December proved moderate at best, up only 0.2 percent, which missed Econoday's consensus for 0.3 percent, after a revised 0.4 percent rise in November. December's slowing reflects a $36.2 billion decrease in government subsidy payments to farmers.

These data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil fell 70 cents to US$58.16, while gold rose US$8.30 to US$1,591.00. The US dollar was mixed against major currencies. The US Treasury 30-year bond yield fell 5 basis points to 2.00 percent while the 10-year note yield fell 1 basis points to 1.51 percent.

European markets

European equities dropped again Friday on news of spreading coronavirus, weak economic reports, and renewed US-EU-UK trade worries. The Europe-wide STOXX 600 fell 1.1 percent, the German DAX dropped 1.3 percent, the French CAC lost 1.1 percent, and the UK FTSE-100 was down 1.3 percent.

The coronavirus scare remained the market focus, as Italy and UK reported their first cases. Meanwhile, news that the UK and EU plan to defy the United States on Huawei sanctions, and lack of progress in the US-EU dispute over autos and digital trade, left markets uneasy, and Friday’s batch of late-2019 European economic reports suggested a slowdown was already under way. Adding to the unease, Jan. 31 marked the UK’s formal exit from the EU.

Among sectors in the STOXXX 600, those with heavy exposure to China were hit hardest, including luxury, travel, leisure, and auto names. Lufthansa was off 2.3 percent as airlines scaled back service to China. Banks suffered, with Spain’s Banco Sabadell off 11.2 percent on poor quarterly earnings. Oil and mining stocks tanked on worries that the coronavirus will torpedo the Chinese economy.

In economic news, flash GDP data showed the Eurozone economy slowing at the end of 2019. A minimal 0.1 percent quarterly increase in total output was well short of an upwardly revised 0.3 percent rise (was 0.2 percent) in the July-September period and constituted the worst performance since GDP last contracted in 2013. It was also at the lower end of expectations. Annual growth was just 1.0 percent, a 6-year low. Separately, France also ended 2019 on a surprisingly soft note as real GDP shrank 0.1 percent on the quarter, its first contraction since 2016. Annual growth fell 0.6 percentage points to just 0.8 percent. Separately, German retail sales fell back 3.3 percent in December after a revised 1.6 percent monthly rise in November. The December drop was much steeper than expected and by far the worst performance in recent history.

Asia Pacific markets

Major Asian markets posted mixed results Friday but closed the week lower, with the coronavirus outbreak still the main focus of investors’ attention. Hong Kong’s Hang Seng index underperformed on both the day and the week, down 0.5 percent and 5.9 percent respectively. Japan’s Nikkei and Topix indices rose 1.0 percent and 0.6 percent respectively on the day after the release of mixed data, but finished the week down 2.6 percent and 2.7 percent respectively. Australia’s All Ordinaries index rose 0.2 percent on the day and closed the week down 1.1 percent. Chinese markets were closed for lunar new year holidays all week and are likely to fall sharply when trading resumes Monday.

Japanese data published Friday showed weaker retail sales growth but a rebound in industrial production and another month of very low unemployment in December. Retail sales fell 2.6 percent on the year in December after falling 2.1 percent in November, bigger than the consensus forecast for a decline of 1.7 percent, with growth weaker in key categories including food, fuel, and motor vehicles. Growth in industrial production, however, improved in both month-on-month and year-on--year terms in December, broadly in line with forecasts made last month by officials but in contrast with PMI survey data which indicated that conditions in the manufacturing sector weakened that month. Japan's unemployment rate was unchanged at 2.2 percent in December, with a solid increase in employment and a small fall in the participation rate.

China's CFLP Manufacturing PMI index fell from 50.2 in December to 50.0 in January, just below the consensus forecast of 50.1 and indicating that activity in the sector was unchanged after slight expansion in the previous two months. The index has indicated that conditions in the sector were close to stagnant for all of 2019 and this has now extended into 2020. The CFLP Non-Manufacturing PMI index advanced from 53.5 in December to 54.1 in January. Other data published today showed a small drop in Australian producer price inflation from 1.6 percent in the three months to September to 1.4 percent in the three months to December, whereas data published earlier in the week showed a small increase in consumer price inflation.

Looking forward

Central Bank activities

Feb-06

India

RPI Policy Statement

Feb-07

Australia

RBA Policy Announcement

The following indicators will be released this week...

Europe

Feb-03

Eurozone

PMI Manufacturing Index (January)

 

France

PMI Manufacturing Index (January)

 

Germany

PMI Manufacturing Index (January)

 

Switzerland

SVME Purchasing Managers Index (January)

 

UK

CIPS/PMI Purchasing Managers Index (January)

Feb-04

Eurozone

PPI (December)

 

Italy

CPI (January p)

 

UK

PMI Construction (January)

Feb-05

Eurozone

PMI Composite (January)

 

 

Retail Sales (December)

 

France

PMI Composite (January)

 

Germany

PMI Composite (January)

 

Switzerland

SECO Consumer Climate (January)

 

UK

CIPS/PMI Services Index (January)

Feb-06

Germany

Manufacturers’ Orders (December)

Feb-07

France

Industrial Production (December)

 

 

Merchandise Trade (December)

 

Germany

Industrial Production (December)

 

 

Merchandise Trade (December)

 

Italy

Retail Sales (December)

 

UK

Halifax HPI (January)

Asia Pacific

Feb-03

China

PMI Manufacturing Index (January)

 

Hong Kong

GDP (Q4 a)

 

India

PMI Manufacturing Index (January)

 

Japan

PMI Manufacturing Index (January)

Feb-05

China

General Services PMI (January)

 

Japan

PMI Composite (January)

 

New Zealand

Labor Market Conditions (Q4}

 

Singapore

PMI (January)

Feb-06

Australia

Merchandise Trade (December)

 

 

Retail Sales (December)

Feb-07

Japan

Household Spending (December)

Americas

Feb-03

US

Construction Spending (December)

 

 

ISM Manufacturing Index (January)

 

 

PMI Manufacturing Index (January)

Feb-04

US

Factory Orders (December)

 

 

Motor Vehicle Sales (January)

Feb-05

Canada

Merchandise Trade (December)

 

US

ADP Employment (January)

 

 

International Trade (December)

Feb-06

 

Jobless Claims (Week of Jan. 25)

 

 

Productivity and Costs (Q4)

Feb-07

Canada

Ivey PMI (January)

 

 

Labor Force Survey (January)

 

US

Employment Situation (January)

Global stock markets

 

Index

31 Jan 2020

Daily Change

% Change Daily

North America

United States

Dow

28256.03

-603.41

-2.1

 

NASDAQ

9150.94

-147.99

-1.6

 

S&P 500

3225.52

-58.14

-1.8

Canada

S&P/TSX Comp

17318.49

-172.07

-1.0

Europe

UK

FTSE 100

7286.01

-95.95

-1.3

France

CAC

5806.34

-65.43

-1.1

Germany

XETRA DAX

12981.97

-175.15

-1.3

Italy

MIB

23237.03

-544.07

-2.3

Spain

Ibex 35

9367.9

-110.00

-1.2

Sweden

OMX Stockholm 30

1783.26

-4.70

-0.3

Switzerland

SMI

10627.88

-121.04

-1.1

Asia/Pacific

Australia

All Ordinaries

7121.2

12.56

0.2

Japan

Nikkei 225

23205.18

227.43

1.0

 

Topix

1684.44

9.67

0.6

Hong Kong

Hang Seng

26312.63

-136.50

-0.5

S. Korea

Kospi

2119.01

-28.99

-1.4

Singapore

STI

3153.73

-16.95

-0.5

China

Shanghai Comp

*

*

*

Taiwan

TAIEX

11495.1

73.36

0.6

India

Sensex 30

40723.49

-190.33

-0.5

*Markets closed

Note: all releases are listed in local time.

Important Information

Econoday Inc. is a US company that provides financial commentary and indicators to industry professionals. All information provided and views expressed are those of Econoday. Reference in this document to specific securities should not be construed as a recommendation to buy or sell these securities, but is included for the purposes of illustration only. Past performance is not a reliable indicator of future results. The value of investments can go down as well as up and investors may not get back the amount invested.