Monday, February 24, 2020

Outlook for stock prices dampen as South Korea and Italy confirms a surge in coronavirus cases over the weekend

Tags
  • Dollar
  • Gold
  • Stocks
  • Oil

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Market Recap: Outlook for stock prices dampen as South Korea and Italy confirms a surge in coronavirus cases over the weekend

Stocks in the US fell on Friday after it was reported that the number of coronavirus cases in South Korea doubled, causing investors to speculate that the impact of the virus outbreak on the global economy could be worse than anticipated. Markit PMI data in the US was worse-than-expected across the board. Most notably, the services sector PMI report indicated that the sector was in contraction, with the index falling from 53.4 to 49.4 in February in Markit's preliminary report, the lowest level since October 2013. The S&P500 and Nasdaq fell more than 1% on Friday while the DJIA retreated 0.78% to 28,992.41.

Indexes Change (%) Net Change Closing Price
Dow Jones -0.78% -227.57 28,992.41
S&P500 -1.05% -35.48 3,337.75
Nasdaq -1.79% -174.38 9,576.59
*Source: Bloomberg

Friday and Thursday's slump pulled all major equity indices lower to suffer losses last week, with the exception of the ASX200. The KOSPI suffered the most among major indices after declining four out of five days last week, as the increase in coronavirus cases prompted the government to impose restrictions on the affected city of Daegu.

Indexes Weekly Change (%) Net Change Closing Price
Dow Jones -1.38% -405.67 28,992.41
S&P500 -1.25% -42.41 3,337.75
Nasdaq -1.59% -154.59 9,576.59
FTSE100 -0.07% -5.21 7,403.92
Euro Stoxx -1.06% -40.59 3,800.38
Nikkei -1.27% -300.85 23,386.74
KOSPI -3.60% -80.75 2,162.84
ASX200 +0.12% +8.76 7,138.96
Hang Seng -1.82% -506.79 27,308.81
Straits Times -1.21% -39.00 3,181.03
*Source: Bloomberg

The greenback weakened against all major currencies on Friday thanks to weak economic data in the US, prompting investors to pull back from the dollar and use gold as a shelter from risk instead. The Dollar Index fell 0.60% from its three-year high of 99.87 to 99.43 as a result.

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Gold surged 1.47% to 1,643.41’s level on Friday as investors shifted to the precious metal for shelter against the surge in coronavirus cases outside of China and ahead of the weekend. US Treasuries were also higher across the board, with benchmark 10-year yields retreating 4bps to 1.47%.

Safe Haven Assets Change (%) Net Change Closing Price
Gold +1.47% +23.85 1,643.41
Silver +0.67% +0.12 18.34
JPY +0.44% +0.49 111.61
*Source: Bloomberg
US Treasury yields Change (bps) Yield (%)
2-Year -3 1.35%
10-Year -4 1.47%
30-Year -5 1.91%
*Source: Bloomberg

Oil futures fell on Friday as the surge in cases outside of China renewed concern of a global slowdown in demand for crude oil. Brent and WTI crude futures both fell, but still managed to post a weekly gain of 2.06% and 2.03% respectively. But on Monday, both Brent and WTI crude oil futures were more than 2% lower, as the outlook for oil demand is likely to be skewed to the downside thanks to a higher likelihood of an accelerated growth in coronavirus cases outside of China.

Oil Futures Change (%) Net Change Closing Price
Brent Crude -1.37% -0.81 58.50
WTI Crude -0.93% -0.50 53.38
*Source: Bloomberg

Asian stocks look almost certain to be set for losses on Monday morning, with the KOSPI index more than 3% lower as of 1.02pm (GMT +8). The Tokyo Stock Exchange will remain closed on Monday for a bank holiday and reopen on Tuesday. The sudden surge in coronavirus cases outside of China will likely drive fear in the market which will most likely suppress stock prices in the short-term. Cases in South Korea soared to 763 on Monday morning from 104 on Friday morning, with deaths in the country rising to 7. Italy confirmed 137 more cases over the weekend, increasing the number of infections in the country to 140 from 3. The sudden climb in cases prompted the Italian government to impose severe restrictions on the affected cities.

Asia Change (%) Net Change Last Price As of (GMT +8)
Nikkei Index -3.10% -67.06 2,095.78 1:02:30 PM
KOSPI Index -2.19% -156.16 6,982.80 1:02:35 PM
ASX200 Index -1.48% -404.97 26,903.84 12:54:09 PM
*Source: Bloomberg

The focus of the week ahead will continue to be on the coronavirus outbreak, but attention will be on cases outside of China. The number of cases outside of China will most likely grow exponentially over the week as countries will likely increase the number of tests being conducted to detect the virus in lieu of the unexpected surge of cases in South Korea and Italy. Futures tracking major US indices were more than 1% lower as of Monday 1pm (GMT +8).

US Futures Change (%) Net Change Last Price As of (GMT +8)
Dow Futures -1.35% -391.00 28,590.00 1:00:27 PM
S&P500 Futures -1.36% -45.25 3,294.00 1:00:23 PM
Nasdaq Futures -1.73% -163.50 9,294.50 1:00:26 PM
*Source: Bloomberg

Highlights for the week ahead include Germany's economic expectations survey for February, the US' second estimate for its Q4 GDP and January's personal income and spending report in the US.

Economic data releases for the day ahead include (GMT +8):

  • Germany Feb Business Climate IFO (IFO) (5pm)
  • Germany Feb Expectations Survey (IFO) (5pm)