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On 12 February 2020 - US, Europe, Asia better as market sees virus slowing

Anne D Picker

Anne D Picker - Econoday

Underlying bullish case keeps stocks buoyant.

US markets

US equities extended their recent gains Wednesday as signs of slowing infection rates for the coronavirus helped sustain the underlying bullish narrative: low interest rates, steady growth, diminished trade tensions. The Dow industrials rose 0.9 percent, the S&P 500 gained 0.6 percent, and the NASDAQ was up 0.9 percent.

A second day of congressional testimony from Fed Chair Jay Powell left unaltered the market’s expectation that rates remain on hold, with an accommodative stance and expanding balance sheet.

Outperforming sectors included consumer discretionary, energy – led by rising oil prices in the risk-on trade – and communications services. Consumer staples, health care, and financials lagged.

On a busy earnings day, Shopify, the e-commerce company, jumped by 7.7 percent on a revenue beat and widening merchant use of its online platform. Teva, the generic pharmaceutical company, rose 9 percent after an earnings beat and decent guidance. Akamai Technologies rose 1 percent as results topped estimates due to strength in its cloud business and rising traffic on its network.

On the downside, Global Payments, a financial technology company, eased 0.8 percent on disappointing guidance. Lyft, the ridesharing company, dropped 10 percent after disappointing the market on its projected timing for reaching profitability. Bed Bath & Beyond plunged 21 percent on disappointing same-store sales for December and January. Molson Coors slipped 4.4 percent on an earnings miss, with sales off in the US and Canada. CVS, the big pharmacy, eased 0.2 percent after beating on earnings but issuing weak guidance.

These data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose US$1.86 to US$56.11, while gold fell US$2.00 to US$1,569.80. The US dollar was mixed against most currencies. The US Treasury 30-year bond yield rose 2 basis points to 2.08 percent while the 10-year note yield rose 2 basis points to 1.62 percent.

European markets

Risk-on sentiment lifted European equities Wednesday on an active earnings day and on reports of slowing in new infections of the coronavirus in China. The Europe-wide STOXX 600 rose 0.6 percent, the German DAX  gained 0.9 percent, the French CAC rose 0.8 percent, and the UK FTSE-100 was up 0.5 percent.

Cyclicals and sectors exposed to China outperformed, including autos & parts, basic resources, banks, telecom, oil & gas, chemicals, and travel & leisure, while defensives lagged, with utilities, real estate, and health care off. Markets appear to be anticipating a quick end to the epidemic and bounce-back in Chinese economic activity. The market also chose not to focus on another surprisingly weak economic report, this time a big drop in Eurozone industrial production.

Among companies in focus, Dutch brewer Heineken rose 5.2 percent on upbeat earnings and news its longtime CEO would step down. Dutch grocer Ahold Dalhaize rose 1.1 percent after reporting strong US sales. On the downside, Dutch bank ABN Amro dropped 5.8 percent after an earnings miss.

In economic news, December was one of the worst months on record for Eurozone goods production. Excluding construction, output slumped 2.1 percent on the month, its steepest fall since February 2009. With November's advance also revised away, annual growth nosedived from minus 1.7 percent to minus 4.1 percent, its weakest since the global financial crisis.

Asia Pacific markets

Most major Asian markets closed higher Wednesday, with a light regional data calendar again keeping the focus on news about the coronavirus outbreak. Investors appeared to take some reassurance from comments made Tuesday by Fed Chairman Powell indicating that he is monitoring the outbreak but is not at present alarmed by its potential impact on the global economy.

The Shanghai Composite index and Hong Kong’s Hang Seng index both advanced 0.9 percent on the day. Australia’s All Ordinaries index closed up 0.5 percent, boosted by strong gains for the Commonwealth Bank of Australia after it posted positive half-year results. Japanese shares were mixed as trading resumed after Tuesday’s holiday, with the Nikkei index closing up 0.7 percent but the Topix index flat on the day. Japanese conglomerate Softbank surged in response to Tuesday’s news that a US judge had approved a merger between Sprint, in which it holds a major stake, and T-Mobile.

The Reserve Bank of New Zealand left its policy rate unchanged at a record low of 1.00 percent at its meeting Wednesday, in line with the consensus forecast. Although officials acknowledged the potential impact of the coronavirus outbreak on the New Zealand economy, they expressed confidence about the near-term growth and inflation outlook. In particular, officials noted that recent fiscal stimulus by the New Zealand government, in the wake of policy rate cuts earlier in 2019, had created a “better mix” and reduced the need for further rate cuts. Although officials consider there is scope to adjust policy further if required, Wednesday's statement suggests that their preference for now is to maintain the recent stability in rates.

Looking forward

On Thursday in Europe, French ILO unemployment and German CPI figures are due. In North America, US CPI and jobless claims reports are scheduled.

Global stock markets

 

Index

12 Feb 2020

Daily Change

% Change Daily

North America

United States

Dow

29551.42

275.08

0.9

 

NASDAQ

9725.96

87.02

0.9

 

S&P 500

3379.45

21.70

0.7

Canada

S&P/TSX Comp

17832.85

55.74

0.3

Europe

UK

FTSE 100

7534.37

34.93

0.5

France

CAC

6104.73

49.97

0.8

Germany

XETRA DAX

13749.78

121.94

0.9

Italy

MIB

24861.28

172.39

0.7

Spain

Ibex 35

9940.4

57.80

0.6

Sweden

OMX Stockholm 30

1889.75

5.62

0.3

Switzerland

SMI

11089.24

-11.93

-0.1

Asia/Pacific

Australia

All Ordinaries

7185.3

33.86

0.5

Japan

Nikkei 225

23861.21

175.23

0.7

 

Topix

1718.92

-0.72

0.0

Hong Kong

Hang Seng

27823.66

239.78

0.9

S. Korea

Kospi

2238.38

15.26

0.7

Singapore

STI

3223.37

47.80

1.5

China

Shanghai Comp

2926.9

25.23

0.9

Taiwan

TAIEX

11774.19

110.15

0.9

India

Sensex 30

41565.9

349.76

0.9

*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.