The Tuesday Market Minute
- Global stocks retreat as investors and World Health officials grow increasingly concerned over a potential pandemic linked to the coronavirus outbreak in China.
- Four people are confirmed to have died from the respiratory virus, with a further 292 affected and cases reported in Japan, South Korea and Thailand.
- IMF trims its global growth forecasts for this year and next, citing weakness in major emerging markets.
- Gold trades at a two-week high and U.S. Treasury notes rally as investors favor safe-haven assets over risk.
- U.S. equity futures suggest opening bell declines on Wall Street ahead of December Redbook retail sales data at 8:50 am Eastern time and earnings from Halliburton before the start of trading and Netflix and IBM after the close.
U.S. equity futures slumped lower Tuesday, while world stocks retreated and gold touch a two-week high, as investors worried that the spread of a deadly respiratory virus in China could accelerate in the weeks ahead, adding further pressure to emerging markets and sluggish global growth.
China's coronavirus, which afflicts patients with pneumonia-like symptoms that are difficult to detect through traditional medical screening, has killed at least four people and infected more than 290 others, with cases reported in Japan, South Korea and Thailand.
With China's Lunar New Year celebrations set to kick-off on Friday, World Health Organization officials are concerned the virus could spread even more quickly amid the world's most populated country, while investors are worried a SARS-like outbreak could further dampen investment prospects in emerging markets around the region.
The International Monetary Fund, in fact, cited emerging market weakness as the key driver in its decision to trim global economic growth forecasts for this year and next, even as it anticipated near-term gains for trade following last week's phase-one agreement between the U.S. and China.
With moderately lower growth prospects, a potential pandemic developing in China and the threat of a tit-for-tat over digital taxes still brewing between the U.S. and Europe at the start of the World Economic Forum in Davos in Switzerland, Wall Street futures suggest a cautious open ahead of earnings from oil services firm Halliburton (HAL) before the bell and IBM (IBM) Netflix (NFLX) after the close of trading.
Contracts tied to the Dow Jones Industrial Average are indicating a 100 point pullback for the 30-stock average, which closed at a record-high 29,348.10 points on Friday. Futures linked to the S&P 500, meanwhile, suggest a 10 point decline for the broader benchmark.
Gold prices were also active in the risk-off overnight session, with bullion rising to a two-week high of $1,568.35 per ounce while benchmark 10-year U.S. Treasury note yields fell to 1.785% and the yen advanced to 109.88 against the U.S. dollar.
Asia stocks, however, were hit hard by concerns for the coronavirus outbreak, with China shares falling 1.4% in Shanghai and Japan's Nikkei 22 falling 0.91% in Tokyo. The region-wide MSCI ex-Japan benchmark, meanwhile, was marked 1.35% lower heading into the final hours of trading.
European stocks opened weaker across the board, with the Stoxx 600 falling 0.4% by mid-day, lead to the downside by basic resource stocks and a 0.5% slide for the trade-sensitive DAX performance index. Britain's FTSE 100 was marked 0.91% lower as the pound traded at 1.3064 against the U.S. dollar.
Luxury goods stocks were particularly hard-hit, as investors trimmed exposure to the sector amid the expectation of travel restrictions from China should the virus outbreak accelerate. Switzerland's Richemont (CFRUY) fell 4% in early Zurich trading, while France's LVMH (LVMUY) was marked 3% lower in Paris. Britain's Burberry Group (BURBY) in London was marked 3.03% lower at £22.08 per share.
Global oil prices were also on the back foot, despite reports of 'force majeure' on deliveries from two major oilfields in Libya amid that country's ongoing civil war, as traders worried that persistent oversupply and slowing global growth will hold down prices in the near term.
Brent crude futures contracts for March delivery, the global benchmark for pricing, were last see seen 96 cents lower from their Monday levels and trading at $64.24 per barrel, while WTI contracts for the same month, which are more tightly-linked to U.S gasoline prices, were marked 89 cents lower at $57.87 per barrel.