Wednesday, February 5, 2020

China’s central bank stimulus sends global stocks soaring

Tags
  • China
  • Dollar
  • Stocks
  • US earnings' season
  • AUD
  • RBA

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Market Recap: China’s central bank stimulus sends global stocks soaring

Stocks in the US extended gains on Tuesday as investors' fears for a large negative global economic impact from the coronavirus outbreak was relieved by the PBoC's 1.7tn yuan reverse repo stimulus on Monday and Tuesday. The stimulus helped lift stocks across the globe after a global selloff last week.

Tesla’s shares continued to surge on Tuesday, rising 13.73% to close Tuesday's trading session at US$887.06 per share. It’s shares reached as high as US$968.99 per share during the trading session.

Disney beat earnings estimates earlier this morning (EPS: 1.530 (A) vs 1.459 (E); Revenue: US$20.858bn (A) vs US$20.809bn (E)), but focus was on its reported subscribers to its new Disney+ streaming service. Subscribers for its Disney+ service surged to 28.6mn in early February, besting analysts’ estimates of a year-end total of 20.8mn users. Disney is now only 2.1mn behind Hulu in terms of subscribers, although Netflix's 167.1mn subscriber count still dwarfs other streamers. Disney's shares initially surged in after-hours trading but fell 0.20%, to 144.50 as of 8.23am (GMT +8).

Indexes Change (%) Net Change Closing Price
Dow Jones +1.44% +407.82 28,807.63
S&P500 +1.50% +48.67 3,297.59
Nasdaq +2.10% +194.57 9,467.97
*Source: Bloomberg

The greenback was mixed against major currencies even after factory orders in the US unexpectedly surged in December, growing 1.8% from November. China related currencies, aussie and kiwi, advanced after sharply declining since the start of the year. The aussie's advance was also fueled by the RBA holding its cash rate at 0.75% at its monetary policy meeting yesterday, in line with our expectations.

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Safe haven assets extended losses as investors' fears started to settle. Gold, yen and US Treasuries all fell across the board. Benchmark 10-year yields fell 7bps to 1.60%.

Safe Haven Assets Change (%) Net Change Closing Price
Gold -1.51% -23.81 1,552.92
Silver -0.50% -0.09 17.53
JPY -0.76% -0.83 109.52
*Source: Bloomberg
US Treasury yields Change (bps) Yield (%)
2-Year +5.6 1.41%
10-Year +7.2 1.60%
30-Year +7.0 2.08%
*Source: Bloomberg

But crude oil prices continued to be depressed on Tuesday, with Brent crude futures falling for its fourth straight session, declining 0.90%, or US$0.49 to US$53.96 per barrel. WTI crude futures fell below US$50 per barrel on Tuesday after falling for five straight trading sessions.

Oil Futures Change (%) Net Change Closing Price
Brent Crude -0.90% -0.49 53.96
WTI Crude -1.00% -0.50 49.61
*Source: Bloomberg

Stocks in Asia looks set for a second day of recovery on Wednesday. The Nikkei and KOSPI started Wednesday’s trading session 1.16% and 0.90% higher. But Asian stocks may face headwinds as the death toll for the coronavirus outbreak climbs to 490 and as more countries start to confirm local transmission of the virus.

Asia Change (%) Net Change Last Price As of (GMT +8)
Nikkei Index +1.15% +265.06 23,354.38 8:07:55 AM
KOSPI Index +0.67% +14.54 2,171.42 8:27:50 AM
ASX200 Index +0.62% +43.36 6,992.30 8:27:35 AM
*Source: Bloomberg

BNP Paribas (2pm), Spotify (9pm), GlaxoSmithKline (10pm), General motors (11pm) are among the companies that are set to report quarterly earnings later today. Qualcomm (5.45am) will announce its results early in the morning tomorrow. (All timings in GMT +8)

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

  • Germany Jan Services & Composite PMI (Markit) (F) (4.55pm)
  • Eurozone Jan Services & Composite PMI (Markit) (F) (5pm)
  • UK Jan Services & Composite PMI (Markit) (F) (5.30pm)
  • US Jan Private Employment Change (ADP) (9.15pm)
  • US Jan Non-Manufacturing PMI (ISM) (11pm)