Wednesday, January 29, 2020

Equity markets show signs of recovery; Fed’s meeting in focus for the day ahead

Tags
  • China
  • Dollar
  • Gold
  • Yen
  • US earnings' season
  • Federal Reserve

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Market Recap: Equity markets show signs of recovery; Fed’s meeting in focus for the day ahead

Wall Street rebounded on Tuesday after posting a sharp decline earlier on Monday. Investors’ fears waned even as the coronavirus outbreak in China started to spread at an accelerated rate. Hong Kong started to restrict travel from the mainland and the US advised against non-essential travel to China. The death toll hit 132 worldwide and the number of confirmed cases rose to over 6,000.

Apple beat revenue estimates for its latest quarter, with sales reaching US$91.82bn (besting analyst estimates of US$88.38bn). The company’s predicted revenue for the current quarter to range between US$63bn and US$67bn was also higher than estimates of US$62.33bn. It's shares surged post-market after the announcement, although there may be some downside risk from the coronavirus outbreak in China (16.8% of Apple's revenue came from China in 2019, and also has some suppliers that are in the Wuhan area).

Indexes Change (%) Net Change Closing Price
Dow Jones 0.66% 187.05 28,722.85
S&P500 1.01% 32.61 3,276.24
Nasdaq 1.43% 130.37 9,269.68
*Source: Bloomberg

Major currencies were mostly mixed against the dollar on Tuesday, even as the consumer confidence survey for January conducted by the US Conference Board beat economists' forecast of 128, reaching 131.6. December’s durable goods orders in the US also beat estimates, surging to grow 2.4% MoM, instead of the expected 0.3% growth. But durable goods orders were mostly driven by a surge in military orders after the US Congress approved a higher budget for military spending. All other subsets of the capital goods report missed forecasts. Non-defence capital goods orders excluding air fell 0.9% and durable goods ex transportation declined 0.1%. Forex traders will likely be focused on the Fed's decision on monetary policy in the early hours of Thursday, at 3am (GMT +8). But focus will be on the Fed's balance sheet and repo market operations as the FOMC is unlikely to change interest rates.

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Safe haven assets retreated as investors’ fears for the global economy as a result of the coronavirus outbreak started to settle. Gold, yen and US Treasuries all ended their winning streak on Tuesday.

Safe Haven Assets Change (%) Net Change Closing Price
Gold -0.94% -14.89 1,567.17
Silver -3.47% -0.63 17.44
JPY -0.23% -0.25 109.15
*Source: Bloomberg
US Treasury yields Change (bps) Yield (%)
2-Year 2 1.46%
10-Year 5 1.66%
30-Year 6 2.11%
*Source: Bloomberg

Oil recovered slightly after OPEC signalled that it may extend and deepen oil production cuts if oil demand is greatly impacted by the coronavirus outbreak in China.

Oil Futures Change (%) Net Change Closing Price
Brent Crude 0.32% 0.19 59.51
WTI Crude 0.64% 0.34 53.48
*Source: Bloomberg

Asian stocks started Wednesday’s trading session tracking US’ gains but inched lower later in the morning. The Nikkei and KOSPI opened Wednesday's trading session 0.40% and 0.53% higher but started to inch lower into the morning. Investor sentiment in Asia is likely to be mixed as the coronavirus outbreak worsens in China while US companies post positive quarterly earnings results.

Asia Change (%) Net Change Last Price As of (GMT +8)
Nikkei Index 0.15% 33.77 23,249.48 8:41:35 AM
KOSPI Index 0.22% 4.77 2,181.49 9:01:30 AM
ASX200 Index 0.40% 27.94 7,022.40 9:01:35 AM
*Source: Bloomberg

McDonalds (9.30pm), Boeing (11.30pm) and Mastercard (10pm) will be releasing their quarterly earnings reports later today while Facebook (6am), Microsoft (6.30am) and Tesla (7.30am) is set to announce theirs early tomorrow morning. (All timings in GMT +8)

Economic releases for the day ahead (All timings in GMT +8):

  • Germany Feb Consumer Confidence Index (Gfk) (3pm)