Wednesday, January 22, 2020

Investors shift away from risky assets; Sterling spikes after better-than-expected jobs growth

Tags
  • Dollar
  • Yen
  • Pound
  • Stocks
  • Oil
  • US earnings' season

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Market Recap: Investors shift away from risky assets; Sterling spikes after better-than-expected jobs growth

Stocks in the US fell sharply after reopening on Tuesday. The US reported its first confirmed case of the pneumonia-like virus from China. The report came after the number of fatalities from the virus climbed to six in China and after the World Health Organisation (WHO) confirmed that the virus can be transmitted person-to-person. Likely to be affected the most as fears rise are tourism stocks such as airlines, hotels and travel services.

Netflix’s stock fell 0.46% after revising its forecast for new subscriptions down from 7.82 million to 7 million for this quarter. But the streaming giant posted strong results for Q4 2019, beating estimates for both new users and profit. Tesla's shares jumped 7.19% on Tuesday after New Street Research raised its target price on Tesla from US$530 to US$800. UBS' shares in both the US and the Swiss stock markets fell by more than 4% after cutting its forecasts for profit, cost efficiency and dividend growth.

Indexes Change (%) Net Change Closing Price
Dow Jones -0.52% -152.06 29,196.04
S&P500 -0.27% -8.83 3,320.79
Nasdaq -0.19% -18.14 9,370.81
*Source: Bloomberg

China related currencies dropped on Tuesday thanks to fears of the spreading virus. The Aussie declined sharply against the dollar, falling 0.41% while the kiwi and loonie each weakened 0.17% against the greenback. Sterling surged 0.31% after the UK's labour market data for November beat expectations. ILO's unemployment rate remained low at 3.8% as expected while the British economy created 208,000 more jobs in the three months to November, beating estimates of 110,000.

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Meanwhile safe haven assets were mixed on Tuesday. Gold surged early in Tuesday's trading session but fell later to close Tuesday's trading session 0.17% lower to reach 1,558.17. The yen strengthened against the dollar after it was confirmed the virus from China had reached the US. US Treasuries regained traction with benchmark 10-year yields declining 5bps to 1.77%.

Safe Haven Assets Change (%) Net Change Closing Price
Gold -0.17% -2.60 1,558.17
Silver -1.60% -0.29 17.63
JPY 0.28% 0.31 109.87
*Source: Bloomberg
US Treasury yields Change (bps) Yield (%)
2-Year -3 1.53%
10-Year -5 1.77%
30-Year -4 2.24%
*Source: Bloomberg

Oil fell as investors expect demand to be affected by fears of the virus. With Lunar New Year coming up and fears for the virus from China spreading escalates, airlines may experience a surge in cancellations and a sharp decline in demand which will consequently affect demand for oil. Brent crude oil futures retreated 0.94% to 64.59 per barrel.

Oil Futures Change (%) Net Change Closing Price
Brent Crude -0.94% -0.61 64.59
WTI Crude -0.34% -0.20 58.38
*Source: Bloomberg

Asian indices recover slightly on Wednesday morning after Tuesday's sharp decline. The Nikkei and KOSPI started the Wednesday's trading session 0.12% and 0.05% lower but recovered later that morning.

Asia Change (%) Net Change Last Price As of (GMT +8)
Nikkei Index 0.09% 21.71 23,886.27 8:35:35 AM
KOSPI Index 0.29% 6.48 2,246.17 8:55:30 AM
ASX200 Index 0.48% 33.76 7,100.10 8:55:36 AM
Hang Seng Futures 0.31% 86.00 27,987.00 2:59:57 AM
*Source: Bloomberg

Notable earnings reports set to be released today are from Johnson & Johnson (7.45pm GMT +8), Texas Instruments (tentatively before market open) and Intel (tentative). Multiple airlines will also release their quarterly results today and tomorrow.

Economic releases for the day include (all timings in GMT +8):

  • Canada Dec Inflation Rate (CPI) (9.30pm)
  • US Dec House Price Index (10pm)
  • BoC Monetary Policy Decision/Statement (11pm)