Wednesday, February 19, 2020

Apple’s supply woes weigh on global stocks; euro declines nearer towards its three-year low

Tags
  • China
  • Dollar
  • Euro
  • Stocks

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Market Recap: Apple’s supply woes weigh on global stocks; euro declines nearer towards its three-year low

Stocks on Wall Street fell on Tuesday after Apple announced that it does not expect to meet its revenue guidance for the quarter amid supply constraints resulting from the covid-19 virus outbreak in China. The DJIA and S&P500 tumbled while the Nasdaq managed to stay afloat thanks to gains from Tesla (+7.30%), Amazon (+0.97%) and DexCom (+4.26%).

Indexes Change (%) Net Change Closing Price
Dow Jones -0.56% -165.89 29,232.19
S&P500 -0.29% -9.87 3,370.29
Nasdaq +0.02% +1.57 9,732.74
*Source: Bloomberg

The dollar strengthened against all other major currencies except the Japanese yen on Tuesday, as investors shift to safe haven assets amid renewed concern for the economic impact of the virus outbreak. The New Zealand and Australian dollar lagged the most among the major currencies as their economies are the most closely tied to the Chinese economy. The euro continued to decline towards its three-year low on Tuesday after ZEW's economic sentiment index for Germany sharply fell to 8.7 in February from 26.7 in January and well below economists' forecasts for 21.5. The weak sentiment in Germany underpins the potential negative economic impact the coronavirus outbreak can have its manufacturing industry, with automakers likely to be the most impacted with suppliers highly concentrated in the Hubei province in China.

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Safe haven assets gained on Tuesday, with Gold advancing past 1600's level, although the yen only inched slightly higher against the greenback. US Treasuries gained as well, pulling benchmark 10-year yields lower by 2.4bps to 1.56%.

Safe Haven Assets Change (%) Net Change Closing Price
Gold +1.30% +20.48 1,601.61
Silver +2.71% +0.48 17.75
JPY +0.01% +0.01 109.87
*Source: Bloomberg
US Treasury yields Change (bps) Yield (%)
2-Year -1.6 1.41%
10-Year -2.4 1.56%
30-Year -2.8 2.01%
*Source: Bloomberg

Oil recovered from early losses on Tuesday after the US sanctioned part of Russia's biggest oil producers. US Secretary of State Mike Pompeo tweeted on Tuesday that Russian owned oil firm, Rosneft, has been sanctioned for maintaining relations with Venezuela’s leader, Nicolas Maduro. The US sanctions will come with a three-month wind-down period that will end on May 20th. Brent crude oil futures gained for the sixth straight trading session.

Oil Futures Change (%) Net Change Closing Price
Brent Crude +0.14% +0.08 57.75
WTI Crude 0.00% 0.00 52.05
*Source: Bloomberg

In Asia, stocks may be set for recovery on Wednesday after sharp losses on Tuesday, although concerns of the virus outbreak will likely continue to weigh on investor sentiment. The Nikkei and KOSPI opened 0.58% and 0.62% higher but inched slightly lower on Wednesday morning.

Asia Change (%) Net Change Last Price As of (GMT +8)
Nikkei Index +0.46% +107.20 23,301.00 8:38:15 AM
KOSPI Index +0.04% +0.87 2,209.75 8:58:10 AM
ASX200 Index +0.08% +5.80 7,119.50 8:58:05 AM
*Source: Bloomberg

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

  • UK Jan Inflation Rate (CPI) (5.30pm)
  • US Jan Housing Starts (9.30pm)
  • Canada Jan Inflation Rate (CPI) (9.30pm)