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On 24 January 2020 - US off on virus worry; Europe up on data; Asia steady

Anne D Picker

Anne D Picker - Econoday

Energy, health care, financials weak

US markets

Risk-off sentiment returned Friday to sink stocks on more coronavirus worries plus weakness in energy, health care, and financials. The Dow industrials eased 0.6 percent, the S&P 500 fell 0.9 percent, and the NASDAQ also declined 0.9 percent.

The US CDC reported at least three US cases of the virus, and said it was monitoring others. China has extended its efforts to control the outbreak by limiting travel for huge numbers. Traders noted the World Health Organization has declined to declare a health emergency.

Energy was among the worst performers as the sector’s declines continued amid falling crude oil prices spurred by fear of weaker Chinese demand due to the virus epidemic. Health care providers also suffered, with increasing focus on Bernie Sanders’s rising strength in polls. Financials were hit by big earnings misses at Discover Financial Services, off 11.2 percent, and Synchrony Financials, down 9.9 percent. Consumer discretionary stocks lagged on losses in hotel and restaurant stocks. Communications suffered with entertainment and media stocks off the most.

Utilities and consumer staples outperformed as traders rotated into defensive sectors, though technology shares held up a bit better, with help from a big rally in Dow member Intel, up 8.1 percent. The semiconductor leader reported a huge earnings and revenues beat, better guidance, and boosted its quarterly dividend. Another Dow component, American Express, rose 2.9 percent on an earnings beat and upgraded 2020 guidance.

In US economic data, growth has slowed for the manufacturing PMI so far in January, to a lower-than-expected 51.7 after better readings of 52.6 for November and 52.4 in December. Growth in new orders, both domestic and foreign, is flat as are price pressures. PMI's service sample is reporting moderate-to-solid growth of 53.2 so far this month which, when combined with manufacturing, make for a flash composite of 53.1.

These data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil fell US$1.19 to US$60.82, while gold rose US$15.40 to US$1,577.40. The US dollar rose against major currencies but weakened vs. the yen. The US Treasury 30-year bond yield fell 4 basis points to 2.14 percent while the 10-year note yield fell 5 basis points to 1.69 percent.

European markets

Better European purchasing managers reports and corporate news lifted European equities Friday. The Europe-wide STOXX 600 rose 0.9 percent, the German DAX jumped 1.4 percent, the French CAC gained 0.9 percent, and the UK FTSE-100 was up 1.0 percent.

Outperformers included defensive sectors, including utilities, plus technology, with help from strong results at Intel. Bayer, the German chemical and drug-maker, rose 1.7 percent on a report that it may settle its US liability case related to the weed-killer Roundup linked to cancer. Givaudan, a Swiss cosmetics company, gained 2.0 percent on a profits beat and better guidance.

In economic news, at 51.1, the German flash composite output index was on the strong side of market expectations in January. It was also nearly a full point above its final December reading and a 5-month high. Manufacturing remained in the doldrums but, at 45.2, at least the flash sector PMI gained a tidy 1.5 points versus its final year-end mark to secure an 11-month peak. At the same time, its services counterpart was up 1.3 points at a respectable 54.2, its best in five months. Separately, the Eurozone manufacturing flash PMI also outperformed expectations, rising to a surprisingly firm 47.8 from 46.3, as the rate of contraction slowed. At 50.9, the flash composite output index only matched its final December reading. The subdued headline reading was attributable to services where the flash sector PMI slipped from December's final 52.8 to 52.2, a 2-month low.

Asia Pacific markets

Markets were closed in China and Korea as lunar new year holidays begin, while moves elsewhere in the region were generally modest. Although the regional data calendar was busy Friday, investor attention was focused on news about the coronavirus outbreak, with Chinese authorities announcing more cases, fatalities, and travel restrictions, and cases also reported elsewhere in Asia. After a sharp fall Thursday, Hong Kong’s Hang Seng index stabilized Friday, up 0.2 percent on the day but down 3.8 percent on the week. Japan’s Nikkei and Topix indices closed up 0.1 percent and unchanged respectively on the day and fell 0.9 percent and 0.3 percent respectively on the week. Australia’s All Ordinaries index rose 0.1 percent on the day and 0.3 percent on the week. With markets closed Friday, the Shanghai Composite index ended the week down 3.2 percent.

Japanese CPI data published Friday showed increases in both headline inflation and underlying measures of inflation in December. The headline consumer price index rose 0.8 percent on the year in December, up from 0.5 percent in November and the strongest increase since April 2019, while the Bank of Japan's preferred measure of underlying inflation, CPI excluding fresh food and energy prices, advanced 0.9 percent on the year, up from 0.8 percent previously. BoJ officials at their policy meeting earlier this week reaffirmed their commitment to keep policy rates at or below current levels until they are confident that there will not be a loss of "momentum" towards meeting their 2.0 percent inflation target. Today's data will likely reassure officials that there remains some momentum towards meeting this target.

PMI data also indicate conditions in Japan’s manufacturing and services sector have improved a the start of the year. The flash estimate for the Markit manufacturing PMI headline index for January is 49.3, up from the final estimate of 48.4 for December, and reaching its highest level in five months, while the equivalent index for the services sector PMI survey increased from 49.4 in December to 52.1 in January.

Singapore's industrial output fell 0.7 percent on the year in December, improving from a revised decline of 8.9 percent in November, and rose 4.1 percent on the month after falling a revised 8.4 percent previously. Stronger headline growth was driven by rebounds in output in the two largest parts of the sector, the electronics and the biomedical industries.

Looking forward

Central Bank activities

Jan-29

US

FOMC Policy Announcement and Fed Chair Press Conference

Jan-30

UK

BOE Policy Announcement

The following indicators will be released this week...

Europe

Jan-27

Germany

Ifo Survey (January)

Jan-28

Switzerland

Merchandise Trade (December)

 

UK

Distributive Trades (January)

Jan-29

Eurozone

M3 Money Supply (December)

 

Germany

Gfk Consumer Climate (February)

 

Italy

Business and Consumer Confidence (January)

Jan-30

Eurozone

EC Economic Sentiment (January)

 

 

Unemployment Rate (December)

 

Germany

CPI (January p)

 

 

Unemployment Rate (January)

 

Switzerland

KOF Swiss Leading Indicator (January)

Jan-31

Eurozone

GDP Flash (Q4)

 

 

HICP Flash (January)

 

France

Consumer Mfg Goods Consumption (December)

 

 

CPI (January p)

 

 

GDP Flash (Q4)

 

 

PPI (December)

 

Switzerland

Adjusted Retail Sales (December)

Asia Pacific

Jan-29

Australia

CPI (Q4)

 

Japan

Merchandise Trade (December)

 

Singapore

CPI (December)

Jan-30

Hong Kong

Merchandise Trade (December)

 

New Zealand

Merchandise Trade (December)

Jan-31

China

CFLP Manufacturing PMI (January)

 

 

CPI (Q4)

 

Japan

Industrial Production (December)

 

 

Retail Sales (December)

 

 

Unemployment Rate (December)

Americas

Jan-27

US

New Home Sales (December)

Jan-28

US

Consumer Confidence (January)

 

 

Durable Goods Orders (December)

 

 

S&P Corelogic Case-Shiller HPI (November)

Jan-29

US

International Trade in Goods (December)

 

 

Pending Home Sales Index (December)

Jan-30

US

GDP (Q4 a)

 

 

Jobless Claims (Week of Jan. 25)

Jan-31

Canada

Monthly GDP (November)

 

US

Chicago PMI (January)

 

 

Consumer Sentiment (January f)

 

 

Employment Cost Index (Q4)

 

 

Personal Income and Outlays (December)

Global stock markets

 

Index

24 Jan 2020

Daily Change

% Change Daily

North America

United States

Dow

28989.73

-170.36

-0.6

 

NASDAQ

9314.91

-87.57

-0.9

 

S&P 500

3295.47

-30.07

-0.9

Canada

S&P/TSX Comp

17565.34

-56.44

-0.3

Europe

UK

FTSE 100

7585.98

78.31

1.0

France

CAC

6024.26

52.47

0.9

Germany

XETRA DAX

13576.68

188.26

1.4

Italy

MIB

23969.13

262.08

1.1

Spain

Ibex 35

9562

43.50

0.5

Sweden

OMX Stockholm 30

1812.85

17.42

1.0

Switzerland

SMI

10849.75

35.81

0.3

Asia/Pacific

Australia

All Ordinaries

7203.18

4.14

0.1

Japan

Nikkei 225

23827.18

31.74

0.1

 

Topix

1730.44

-0.06

0.0

Hong Kong

Hang Seng

27949.64

40.52

0.2

S. Korea

Kospi

*

*

*

Singapore

STI

3240.02

5.46

0.2

China

Shanghai Comp

*

*

*

Taiwan

TAIEX

*

*

*

India

Sensex 30

41613.19

226.79

0.6

*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.