Monday, March 2, 2020

Asia Times: Equity futures signal investors to prepare for another slump in stock markets on Monday

Tags
  • China
  • Dollar
  • Gold
  • Yen
  • Stocks
  • Oil
  • ISM PMI

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Market Recap: Equity futures signal investors to prepare for another slump in stock markets on Monday

Stocks around the world plummeted again, although the Nasdaq managed to edge out a very slight gain on Friday. Fed Chair Jerome Powell helped alleviate equities on Friday after saying that the coronavirus poses evolving risks to US growth and signalled that the US central bank will be prepared to cut rates if necessary. Fed Fund Futures implied probabilities skyrocketed to 152.5% on Friday from 85% on Thursday, indicating that investors now see a definite rate cut in March with a possibility of it being 50bps instead of just 25bps.

Indexes Daily Change (%) Net Change Closing Price
Dow Jones -1.39% -357.28 25,409.36
S&P500 -0.82% -24.54 2,954.22
Nasdaq +0.01% +0.89 8,567.37
*Source: Bloomberg

Major indices in the US and Europe suffered double digit losses last week, with the Euro Stoxx index suffering the most as a result of Italy's coronavirus woes. As of Monday morning, the number of confirmed cases of the virus in Italy soared to over 1,600, from roughly 400 last Friday. The majority of coronavirus cases in the country are concentrated in the northern regions of Italy, which contribute a large share to Italy's overall GDP.

Indexes Weekly Change (%) Net Change Closing Price
Dow Jones -12.36% -3,583.05 25,409.36
S&P500 -11.49% -383.53 2,954.22
Nasdaq -10.54% -1,009.22 8,567.37
FTSE100 -11.12% -823.31 6,580.61
Euro Stoxx -12.39% -470.89 3,329.49
Nikkei -9.59% -2,243.78 21,142.96
KOSPI -8.13% -175.83 1,987.01
ASX200 -9.77% -697.76 6,441.20
Hang Seng -4.32% -1,178.88 26,129.93
Straits Times -5.34% -169.95 3,011.08
*Source: Bloomberg

The dollar fell on Friday after Powell's remarks, with the Dollar Index retreating 0.38%. The yen posted its biggest weekly gain since July 2016, surging 1.55% against the greenback. The Australian and New Zealand dollar continued to be pressured by the coronavirus outbreak.

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Meanwhile, gold sank 3.61% on Friday, possibly as traders used gains from the precious metal to cover margin calls for riskier assets. Yen advanced more than 1% against both the greenback and the euro. US Treasuries surged again on Friday, pulling benchmark 10-year yields 11.2bps to close at a record low 1.15%.

Safe Haven Assets Daily Change (%) Net Change Closing Price
Gold -3.61% -59.32 1,585.69
Silver -6.24% -1.11 16.40
JPY +1.55% +1.70 107.89
*Source: Bloomberg
US Treasury yields Daily Change (%) Yield (%)
2-Year -14.9 0.91%
10-Year -11.2 1.15%
30-Year -8.3 1.68%
*Source: Bloomberg

Oil prices fell on Friday, with both Brent and WTI crude oil futures losing more than 2% for the fourth straight trading session. The sharp drop on Friday pushed both futures contracts to suffer more than 14% over the last week.

Oil Futures Daily Change (%) Net Change Closing Price
Brent Crude -3.98% -2.06 49.67
WTI Crude -4.95% -2.33 44.76
*Source: Bloomberg

On Monday morning, equities look set for more losses, after the count of coronavirus cases climbed over the weekend. China's official manufacturing PMI slumped in February to 35.7 from 50.0 in January, much lower than economists' forecasts for a drop to 45.0. The country's non-manufacturing PMI dropped to 29.6 in February from 54.1 in January. In Asia, the Nikkei and KOSPI were both trading lower on Monday morning. Equity index futures tracking the three major indices in the US were each more than 1% lower as of 8.54am (GMT +8).

Asia Daily Change (%) Net Change Last Price As of (GMT +8)
Nikkei Index -1.18% -249.85 20,893.11 8:39:00 AM
KOSPI Index -0.50% -9.99 1,977.02 8:59:00 AM
ASX200 Index -2.85% -183.61 6,257.60 8:58:35 AM
*Source: Bloomberg
US Futures Daily Change (%) Net Change Last Price As of (GMT +8)
Dow Futures -1.01% -256.00 25,108.00 8:54:54 AM
S&P500 Futures -1.18% -34.75 2,916.25 8:54:54 AM
Nasdaq Futures -1.36% -115.25 8,338.75 8:54:54 AM
*Source: Bloomberg

In the week ahead, the RBA will be deciding on monetary policy on Tuesday. The decision may be the first rate cut in a series of central bank easing across major countries. Futures tracking the RBA's decision now imply that the financial market is pricing roughly a 125% chance of a rate cut this Tuesday. The BoC will decide on its monetary policy on Wednesday. Then on Thursday, OPEC members will meet to decide on the future of oil production cuts. It looks more than likely that the bloc will extend its current production limits, with a high possibility of a higher limit to production as oil prices plunged over last week.

Major economic data releases this week are PMI reports from ISM and employment change data in the US.

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

  • Germany Feb Manufacturing PMI (Markit) (F) (4.55pm)
  • Eurozone Feb Manufacturing PMI (Markit) (F) (5pm)
  • UK Feb Manufacturing PMI (Markit) (F) (5.30pm)
  • US Feb Manufacturing PMI (ISM) (11pm)