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On 5 February 2020 - US, Europe, Asia rebound continues as virus worries ease

Anne D Picker

Anne D Picker - Econoday

Economic data and earnings add to risk-on move.

US markets

US stocks advanced Wednesday on an easing in coronavirus worries, a recovery in oil prices, and better economic data. The Dow industrials rose 1.7 percent, the S&P 500 gained 1.1 percent, and the NASDAQ was up 0.4 percent.

Chinese media said Chinese researchers have found two drugs that work to treat the virus, and Sky News reported UK researchers had accelerated progress toward a vaccine. However, World Health Organization officials appeared to downplay the positive news.

Among sectors, energy led gainers as crude oil prices rebounded from recent losses. Financials and health care were also leaders, with health care benefiting from perceptions that as President Trump’s political fortunes improve, prospects diminish for curbs on health care firms. Communications services and technology shares underperformed, but real estate was the only actual decliner.

Best performing shares included Humana, the managed care giant, up 6.4 percent on favorable quarterly results, and on the improved political environment. Coty, a beauty products company, surged by 15 percent on a big earnings and revenues beat. Microchip Technologies, the semiconductor firm, rose 6.7 percent on strong quarterly results.

Among other companies in the news, Walt Disney, a Dow component, fell 2.3 percent despite positive results for the latest quarter, after warning of the impact of closing its Chinese amusement parks. Big pharma firm Merck fell 2.9 percent after reporting disappointing sales for its best-selling Keytruda drug. Ford Motor fell 9.6 percent after an earnings miss and lowered guidance.

In US economic data, ADP estimated private payroll growth for January's employment report at 291,000. Econoday's consensus for ADP's estimate was much lower at 154,000 as is the consensus for private payrolls in Friday's employment report, at 150,000 versus 139,000 in December. In a separate report, ISM's non-manufacturing index rose 6 tenths in January to 55.5 for the best score since August. New orders contributed to the strength, up nearly 1 point to 56.2, as did business activity (output), up nearly 4 points to 60.9.

These data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose US$1.39 to US$55.46, while gold rose US$5.49 to US$1560.80. The US dollar was mixed against major currencies. The US Treasury 30-year bond yield rose 6 basis points to 2.14 percent while the 10-year note yield rose 5 basis points to 1.65 percent.

European markets

Risk-on sentiment lifted European equities after reports of progress toward finding a cure and a vaccine for the coronavirus, though cases continue to rise rapidly in China. The Europe-wide STOXX 600 rose 1.3 percent, the German DAX gained 1.5 percent, the French CAC rose 1.0 percent, and the UK FTSE-100 gained 0.6 percent.

Upbeat UK and Eurozone purchasing managers data and positive earnings reports added to the positive mood. Among sectors, basic resources, autos & parts, and travel & leisure led the gains, while defensive sectors lagged, including utilities, real estate, and telecom.

Hotel companies and airlines were among the biggest winners, as they rebounded from concerns linked to the coronavirus. IAG, the parent of British Airways, rose 3.9 percent, while Lufthansa rose 4.2 percent. Accor, the French hotelier, rose 2.1 percent, while IHG, the UK hotel company, rose 1.9 percent.

Technology shares outperformed, with Infineon Technologies, the German semiconductor maker, up 10.7 percent after affirming its guidance. Construction and materials stocks were lifted by gains in Vinci, the French airport operator, up 2.0 percent after an earnings beat. On the downside, Imperial Brands, the UK cigarette company, dropped 6.6 percent after warning on earnings because of US regulatory problems.

In economic news, the Eurozone private sector economy performed a little better than originally thought at the start of the year. The flash composite output index was revised up from 50.9 to 51.3, now 0.4 points above its final December reading and its highest outturn since last August. Separately, Eurozone retail sales slumped a much steeper than expected 1.6 percent in December, their worst performance since March 2008. This was their fourth decline in the last six months and reduced annual growth from 2.3 percent to 1.3 percent.

Asia Pacific markets

Major Asian markets closed higher for the second consecutive day Wednesday, with investor concerns about the potential market impact of the coronavirus outbreak appearing to diminish in response to Chinese authorities’ efforts to support liquidity conditions. The Shanghai Composite index led regional gains, closing up 1.3 percent on the day, with Japan’s Nikkei and Topix indices also both closing up 1.0 percent. Australia’s All Ordinaries index advanced 0.5 percent on the day, while Hong Kong’s Hang Seng index gained 0.4 percent.

PMI surveys published Wednesday showed improved conditions in the Japanese and Indian services sectors but slower growth in the China services sector, further signs of recovery in Singapore, and a smaller but still substantial contraction in Hong Kong’s economy. The Markit PMI survey's headline index for the Japanese services sector advanced to 51.0, below the flash estimate of 52.1 but confirming an increase from 49.4 in December. The business activity index in the equivalent survey for the Chinese and Indian services sectors fell from 52.5 to 51.8 and advanced from 53.3 to 55.5 respectively. The Markit Hong Kong PMI survey's headline index rose from 42.1 in December to 46.8 in January, while the equivalent index for Singapore advanced from 51.0 to 51.4.

New Zealand labour market statistics for the three months to December showed steady and subdued employment growth and a small fall in the unemployment rate from 4.1 percent to 4.0 percent. The participation rate and wage growth were also little changed from the previous quarter.

Looking forward

On Thursday in Asia/Pacific, Australian merchandise trade and Australian retail sales reports are due, and the Reserve Bank of India will release its policy statement. In Europe, German manufacturers’ orders are due. In North America, the US Challenger job cut report, US jobless claims, and US productivity and costs figures will be released.

Global stock markets

 

Index

5 Feb 2020

Daily Change

% Change Daily

North America

United States

Dow

29290.85

483.22

1.7

 

NASDAQ

9508.68

40.71

0.4

 

S&P 500

3334.69

37.10

1.1

Canada

S&P/TSX Comp

17651.59

138.86

0.8

Europe

UK

FTSE 100

7482.48

42.66

0.6

France

CAC

5985.4

50.35

0.9

Germany

XETRA DAX

13478.33

196.59

1.5

Italy

MIB

24236.63

391.78

1.6

Spain

Ibex 35

9717.8

154.90

1.6

Sweden

OMX Stockholm 30

1847.35

26.31

1.4

Switzerland

SMI

10994.15

193.51

1.8

Asia/Pacific

Australia

All Ordinaries

7080.94

33.34

0.5

Japan

Nikkei 225

23319.56

234.97

1.0

 

Topix

1701.83

17.59

1.0

Hong Kong

Hang Seng

26786.74

110.76

0.4

S. Korea

Kospi

2165.63

7.73

0.4

Singapore

STI

3200.13

43.56

1.4

China

Shanghai Comp

2818.09

34.80

1.3

Taiwan

TAIEX

11573.62

17.70

0.2

India

Sensex 30

41142.66

353.28

0.9

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.