Friday, February 14, 2020

Sterling spikes after the UK’s Cabinet reshuffle; Stocks suffer as hopes that the coronavirus peaking faded

Tags
  • Dollar
  • Euro
  • Pound
  • Stocks
  • US earnings' season

02142020a

Market Recap: Sterling spikes after the UK’s Cabinet reshuffle; Stocks suffer as hopes that the coronavirus peaking faded

US Stocks retreats on Thursday after China revised its counting system for its coronavirus cases. The revision to its counting system resulted in a spike in new cases in China’s Hubei province, dampening any optimism that the coronavirus outbreak is starting to peak. All three major indices in the US fell from its record highs.

In company news, Alibaba shares fell 1.76% to US$220.36 per share in the US after the company warned that overall revenue will be negatively impacted and that the hit to growth could be significantly negative as a result of the coronavirus outbreak in China during its earnings call on Thursday evening. The warning came after the company beat analysts' estimates in its quarterly earnings report (Revenue: 161.46bn yuan (A) vs 159.51bn yuan (E); Adj EBITDA: 55.88bn yuan (A) vs 53.41bn yuan (E); Adj EPS: 18.19 yuan (A) vs 15.35 yuan (E); Q3 Mobile Monthly Active Users: 824mn (A) vs 804.7mn (E)).

Nvidia shares were 5.18% higher in after-hours trading as of 8.58am (GMT +8) after the company beat analysts’ estimates for its quarterly earnings in Q4 (Revenue: US$3.11bn (A) vs US$2.96bn (E); Adj EPS: US$1.89 (A) vs US$0.80 (E)). The company also lifted investors’ optimism with its strong revenue forecast, expecting demand for data-center and gaming chips to increase.

Indexes Change (%) Net Change Closing Price
Dow Jones -0.43% -128.11 29,423.31
S&P500 -0.16% -5.51 3,373.94
Nasdaq -0.14% -13.99 9,711.97
*Source: Bloomberg

Sterling surged late into Thursday's trading session after Sajid Javid resigned as Chancellor of the Exchequer. Javid quit after British Prime Minister Boris Johnson demanded that he fire all five of his senior aides. The departure of Javid caused speculation that the British government may want more control over fiscal stimulus to apply more aggressive spending.

In the US, a better-than-expected core and headline inflation (CPI: 2.5% (A) vs 2.4% (E); Core CPI: 2.3% (A) vs 2.2% (E)) coupled with lower initial jobless claims (205k (A) vs 210k (E)) was enough to boost the greenback against most major currencies besides the British pound and Japanese yen on Thursday. Traders will likely be focused on today's retail sales and consumer sentiment data in the US later tonight.

02142020b

Safe haven assets spiked up on Thursday after the total count of confirmed cases soared by almost 16,000 thanks to the revision to China's counting system. Gold erased losses from earlier in the week and the yen ended a three-day losing streak against the dollar. US Treasuries were mostly higher, with benchmark 10-year yields falling 1.6bps to 1.62%.

Safe Haven Assets Change (%) Net Change Closing Price
Gold +0.63% +9.94 1,576.00
Silver +0.93% +0.16 17.45
JPY +0.25% +0.27 109.82
*Source: Bloomberg
US Treasury yields Change (bps) Yield (%)
2-Year +0.0 1.44%
10-Year -1.6 1.62%
30-Year -1.8 2.07%
*Source: Bloomberg

Oil futures gained despite warnings of a likely drop in demand in oil as a result of the coronavirus on China. Investors likely expect at least an extension to OPEC's oil production cuts at its meeting in March, with a possibility of deeper cuts to lift oil prices for the bloc.

Oil Futures Change (%) Net Change Closing Price
Brent Crude +0.99% +0.55 56.34
WTI Crude +0.49% +0.25 51.42
*Source: Bloomberg

In Asia, stocks started Friday's trading session mixed. The Nikkei and KOSPI both started the day's trading session 0.61% and 0.01% lower, but the KOSPI recovered later in the morning, rising 0.18% to 2,237.07 as of 9.04am (GMT +8). China’s Hubei province added 4,823 new cases of the coronavirus and 116 more fatalities. The total count and death toll of the virus climbed to 65,247 and 1,489 respectively.

Asia Change (%) Net Change Last Price As of (GMT +8)
Nikkei Index -0.86% -205.49 23,622.24 8:44:15 AM
KOSPI Index +0.18% +4.11 2,237.07 9:04:10 AM
ASX200 Index +0.19% +13.67 7,116.90 9:04:06 AM
*Source: Bloomberg

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

  • Germany Q4 GDP (P) (3pm)
  • Eurozone Q4 GDP (P) (6pm)
  • US Jan Retail Sales (9.30pm)
  • US Feb Consumer Sentiment Index (U. of Mich) (P) (11pm)