Dow Futures Tumble As Coronavirus Hits U.K.; Amazon Earnings Support Nasdaq

Amazon's blowout fourth quarter earnings, as well as a WHO recommendation against trade and travel restrictions with China, are supporting global stocks on the final trading day of a volatile January.


The Friday Market Minute

  • Global stocks steady, but investors remain guarded, as WHO recommends no trade or travel restrictions with China even as it declares the coronavirus to be a global health crisis.
  • China confirms 213 deaths and 10,000 cases of the virus, but notes a mortality rate of 2%, lower than that of SARS, as WHO praises efforts.
  • U.S. State Department warns against travel to China, while world's biggest airlines cancel flights.
  • Coronavirus infects two patients in the UK as Europe moves to tighten travel restrictions to China.
  • Britain marks its final day as a member of the European Union and will formally leave the block at 11:00 PM local time in London.
  • Amazon smashes Street earnings forecast, sending shares sharply higher in pre-market trading and supporting a firmer open for both the S&P 500 and the Nasdaq.
  • U.S. equity futures suggest a mixed on Wall Street ahead of personal spending data at 8:30 am Eastern time and earnings from Honeywell, Exxon, Chevron and Caterpillar before the start of trading.

U.S. equity futures were mixed heading into the final trading day of a volatile month for global stocks, with investors indicating cautious optimism over China's ability to contain the deadly coronavirus and markets reacting to stronger-than-expected sales and earnings from online retailing giant Amazon Inc.  (AMZN) - Get Report.

Sentiment was tested, however, after England's Chief Medical Officer confirmed that two patients in Britain, who are members of the same family, tested positive for coronavirus. 

"The patients are receiving specialist NHS care, and we are using tried and tested infection control procedures to prevent further spread of the virus," he said. "The NHS is extremely well-prepared and used to managing infections and we are already working rapidly to identify any contacts the patients had, to prevent further spread."

The World Health Organisation declared the coronavirus, which has killed more than 200 people and infected a further 9,600 others, to be a global health emergency. However, WHO Director-General Tedros Adhanom Ghebreyesus praised China's efforts to contain the spread and said the WHO "doesn't recommend - and actually opposes" travel and trade restrictions with the world's second largest economy.

The assessment helped steady stocks in the overnight session, with Japan's Nikkei 225 rising 1% in Tokyo as the yen -- a traditional safe-haven asset in the region -- eased to 109.04 against the U.S. dollar and the broader MSCI ex-Japan index slipped only 0.4% into the close of trading.

Amazon's surprisingly strong December quarter, which included a 21% increase in sales -- to $87.4 billion -- and a robust 35% surge in revenues from its market-dominating Amazon Web Services added further support to stocks heading into the start of trading on Wall Street, although indices are still likely to struggle to find direction in the final session of the month.

Futures contracts tied to the Dow Jones Industrial Average suggest a 135 point opening bell slip, while those linked to the S&P 500 are indicting a 6.6 point decline. Contracts tied to the Nasdaq Composite are guiding to a 40 point gain, however, largely on the strength of Amazon's 10.5% extended-hours gain, a move that would take the stock firmly past the $1 trillion mark. 

European stocks booked cautious gains before slipping lower, with the Stoxx 600 falling 0.25% and German's DAX performance index trading 0.3% lower in Frankfurt, moves that leave both benchmarks in negative territory for the month.

Britain's FTSE 100 was off to a weaker start, falling 0.6% after the pound jumped to 1.3135 against the dollar following yesterday's Bank of England rate decision, and the country's National Health Service confirmed two cases of the cornoavirus -- from two members of the same family -- early Friday.

Britain's final day as a member of the European Union is also being marked in London, as the U.K. exits the bloc after 47 years following Prime Minister Boris Johnson's successful election win in early December. 

Johnson now has 11 months to agree a comprehensive trade and security arrangement with the EU -- the world's biggest economic bloc and home to more than 300 million citizens -- or risk crashing out at the end of the year on much more onerous WTO terms.

Away from equities, benchmark 10-year U.S. Treasury bond yield remained firmly bid, and trading at 1.575%, amid both the broader coronavirus concerns and yesterday's 2019 GDP data, which showed the slowest rate of growth -- 2.3% -- in at least three years.

The U.S. dollar index, meanwhile, was marked modestly lower from yesterday's levels at 97.92 against a basket of its global peers. 

Global oil prices used the dollar weakness, as well as the WHO advisory against travel and trade restrictions with China, to claw back some of the week's 4% coronavirus-lead declines on the final session of what is likely to be the weakest month for oil markets since the early 1990s.

Brent crude futures contracts for April delivery, the global benchmark for pricing, were last see seen 36 cents higher from their Thursday close in New York and trading at $58.65 per barrel, while WTI contracts for the month of March were seen 41 cents higher at $52.55 per barrel.