Friday, April 24, 2020

Asia Times: Shares fall in Asia on Friday morning amid Intel’s pessimistic outlook and perceived failure for a Covid-19 cure

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Market Recap: Shares fall in Asia on Friday morning amid Intel’s pessimistic outlook and perceived failure for a Covid-19 cure

Major US indices retreated midway into Thursday's trading session after reports from the Financial Times reported that Gilead Science's experimental drug for Covid-19 failed to improve patients' conditions in a Chinese trial. Although, Gilead said that the results from the study were inconclusive due to its early termination. The S&P500 fell as much as 1.37% on the news, losing all of its gains earlier in the day to end 0.05% lower from the previous day's close.

The energy sector led gains in the S&P500, surging 3.01% on Thursday as oil started to show some recovery after Monday's historical negative oil futures prices. Utilities led losses, dropping 1.76% on the day.

Among companies, Intel posted better-than-expected revenue and profit in its Q1 earnings report after the US market closed. But its shares fell 6.00% in after-hours trading as the company pulled its full year forecast as a result of significant economic uncertainty amid the Covid-19 crisis. A sharp downward revision to its Q2 profit forecasts also sparked concern among investors, with the company forecasting net income to reach US$1.04 per share, much lower than analysts' estimates of US$1.11. The pessimistic outlook to the year while surprising to financial markets, looks likely to become reality, as demand for computer components will likely drop following the Covid-19 crisis as a result of a probable recession. As lockdowns start to eventually ease, demand for cloud computing will likely also ease. Consequently, the fall in demand for PC components should also outweigh the surge in demand for its data center chips, since Intel's PC computing segment (51.6% in FY2019) is larger than that of its data center segment (32.6% in FY2019).

Indexes Daily Change (%) Net Change Closing Price
Dow Jones +0.17% +39.44 23,515.26
S&P500 -0.05% -1.51 2,797.80
Nasdaq -0.01% -0.63 8,494.75
*Source: Bloomberg

In the foreign exchange market, commodity-linked currencies dominated for the second day in a row. The New Zealand dollar gained 0.96% against the dollar, followed closely behind by the Australian dollar despite Australia's flash composite PMI for April dropping to a record low of 22.4. Signals from New Zealand Prime Minister Jacinda Ardern that direct payments to households had neither been confirmed or rejected likely helped boost the New Zealand dollar, while preliminary trade data probably lifted the Australian dollar after exports reportedly rose 29% MoM in March.

Elsewhere, the euro weakened 0.43% against the greenback as EU leaders were unable to reach a conclusive agreement on an economic stimulus package for the bloc. German Chancellor Angela Merkel's pledge to back a huge stimulus plan helped the euro earlier in Thursday's trading session, but was unable to sustain gains at the end of the day after EU leaders only reached an agreement on a short-term program, failing to agree on a more robust longer-term program as the bloc were split on the method of funding. France and Spain are leading a group that are set on funding via grants while the Netherlands and Austria were among those that wanted the financial aid program to consist of loans instead of grants. But EU leaders were asked to reach a compromise by May 6th. While incentives continue to be misaligned in the EU bloc, there looks likely to be a compromise with actions from German and Italian leaders signalling at the possibility of funding via a combination of both grants and loans.

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Safe haven assets mostly inched higher on Thursday as the perceived failure of Gilead's experimental Covid-19 drug dampened optimism of a sharp economic recovery in the short-term. Gold inched higher for the second day in a row, while the Japanese yen strengthened 0.14% against the dollar. Longer-term US Treasuries gained while two-year treasuries inched slightly lower. Benchmark 10-year yields retreated 1.8bps to 0.60%.

Safe Haven Assets Daily Change (%) Net Change Closing Price
Gold +0.96% +16.43 1,730.51
Silver +1.05% +0.16 14.98
JPY +0.14% +0.15 107.60
*Source: Bloomberg
US Treasury yields Daily Change (bps) Yield (%)
2-Year +0.6 0.22%
10-Year -1.8 0.60%
30-Year -3.4 1.18%
*Source: Bloomberg

Oil surged for the second day in a row on Thursday, pushing WTI crude oil futures back above US$15 per barrel, with Kuwait cutting its oil output ahead of the May 1st deadline. Algeria also notified that OPEC+ members that it would cut supply immediately as well during talks earlier on April 21st and 22nd. The Premium Times reported that Nigeria will cut production as well, as the country runs out of storage space for its crude oil.

Oil Futures Daily Change (%) Net Change Closing Price
Brent Crude +4.71% +0.96 21.33
WTI Crude +19.74% +2.72 16.50
*Source: Bloomberg

Stocks in Asia were mixed on Friday morning, with the Nikkei and KOSPI inching lower by less than 1% while the ASX200 was slightly higher at 0.49% as of 9.06am (GMT +8). Australian stocks are likely boosted by positive trade data, while investors deliberate on Japan and South Korea's outlook after Intel's less than optimistic outlook for semiconductors in the following months of 2020. Futures tracking major indices in the US look were trading lower on Friday morning as well, likely driven downwards by sentiment on tech stocks. Major tech stocks fell in after-hours trading in the US along with Intel thanks to its surprise pessimism for Q2 earnings.

Asia Daily Change (%) Net Change Last Price As of (GMT +8)
Nikkei Index -0.82% -159.77 19,269.67 8:47:00 AM
KOSPI Index -0.50% -9.60 1,905.13 9:07:00 AM
ASX200 Index +0.49% +25.39 5,242.50 9:06:45 AM
*Source: Bloomberg
US Futures Daily Change (%) Net Change Last Price As of (GMT +8)
Dow Futures -0.52% -121.00 23,216.00 9:00:01 AM
S&P500 Futures -0.68% -19.00 2,761.75 9:00:05 AM
Nasdaq Futures -0.82% -70.50 8,528.25 9:00:04 AM
*Source: Bloomberg

Companies reporting earnings for the day ahead include (all timings in GMT +8 where available):

  • Yelp
  • American Express Co (8.30pm)
  • Verizon Communications Inc (8.30pm)

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

  • Germany Apr Current Situation/Expectations Survey (IFO) (4pm)
  • US Mar Durable Goods Orders (8.30pm)
  • US Apr Consumer Sentiment Survey (U. of Mich) (F) (10pm)