Tuesday, January 28, 2020

Global equity markets retreat as investors shifts to safe havens

Tags
  • China
  • Dollar
  • Gold
  • Euro
  • Stocks
  • Oil

Market Recap: Global equity markets retreat as investors shifts to safe havens

Major indices around the world fell on Monday, as fears grew that the coronavirus outbreak in China could have a negative impact on global economies. China extended its Lunar New Year holiday to February 2nd nationally (and February 9th for Shanghai) in a bid to reduce the amount of people moving around the country, and slow the spread of the virus. There are now more than 4,500 confirmed cases of the coronavirus in China, with the death toll rising to more than 100. The DJIA, S&P 500 and Nasdaq all slid more than 1%, while European indices including the FTSE100, Dax and Euro Stoxx tumbled more than 2%.

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Global indices suffered as discontent grew over the outbreak of the new strain of virus. The Nasdaq made its first weekly loss after six straight weeks of gains.

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The Aussie sharply declined on Monday thanks to its large exposure to the Chinese economy. Investors used the kiwi and Aussie as proxies for positioning against the virus outbreak, as the two countries' economy remain highly dependent on the Chinese economy. The kiwi retreated 0.89% while the Aussie tumbled 1.04% against the dollar on Monday.

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Safe haven assets surged on Monday as demand for lower risk assets surged. Gold, yen and the Swiss franc advanced on Monday. US Treasuries surged as well, pulling benchmark 10-year yields 8bps lower to 1.61%.

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Oil fell below US$60 per barrel on Monday as it continues to face pressure of possible decline in demand thanks to the virus outbreak. Brent and WTI crude oil futures fell sharply on Monday, declining 2.26% and 1.94% respectively.

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Asian stocks are likely to track US losses, as most investors in Asia come back from the Lunar New Year holiday. The Nikkei, KOSPI and ASX200 fell 0.93%, 2.04% and 0.55% during market open on Tuesday.

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Apple is scheduled to have its earnings call at 1am (GMT +4) on Wednesday. Also, Harley Davidson (after US market close), 3M (after US market close) and Xerox holdings are set to release their respective earnings reports as well.

Important economic releases for the day include durable goods orders in the US at 5.30pm (GMT +4).