Dow Futures Rebound, Global Stocks Steady as Coronavirus Concerns Ebb, U.S. Earnings Improve

China's swift reaction to the coronavirus outbreak, as well as a series of stronger-than-expected U.S. earnings last night, has Wall Street futures, as well as global stocks, on the rebound Wednesday.
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The Wednesday Market Minute

  • Global stocks steady following China's swift response to the coronavirus outbreak and a series of stronger-than-expected quarterly earnings on Wall Street last night.
  • China's National Health Commission confirms 440 cases of the respiratory virus, as well as nine deaths, while putting plans in place to limit the spread of the disease heading into the Lunar New Year celebrations.
  • Netflix, IBM and United Airlines top profit forecasts as the U.S. corporate earnings season kicks into high gear, Tesla's market value, meanwhile, could hit $100 billion later today.
  • U.S. equity futures suggest opening bell gains on Wall Street ahead of earnings from Johnson and Johnson before the start of trading and Texas Instruments after the close.

U.S. equity futures bounced higher Wednesday, while global stocks steadied and risk sentiment improved, as China moved swiftly to limit the spread of the deadly coronavirus and investors keyed on a series of stronger-than-expected earnings reports that suggest improving corporate profits in the weeks ahead.

China's National Health Commission said Wednesday that it has confirmed around 440 cases of the deadly coronavirus -- a respiratory affliction which presents with pneumonia-like symptoms in the patients who contract it -- and nine fatalities. The government also said it was taking steps to limit the spread of the virus heading into the Lunar New Year celebrations later this week, marking a stark contrast to its secretive and ineffective reaction to the SARS outbreak in 2003, which eventually killed 800 people in a global pandemic.

China's reaction to the virus, as well as its co-operation with World Health Organization officials, helped markets steady overnight, with investors shifting focus to stronger-than-expected quarterly earnings from Netflix  (NFLX) - Get Report, IBM  (IBM) - Get Report and United Airlines  (UAL) - Get Report after the close of trading yesterday.

Bank of America's benchmark survey of global fund managers controlling around $740 billion in assets suggesting expectations for corporate profits have improved notably over the past few months, to the highest levels since March 2018.

As a result, equity allocations increased to a net 32% overweight, BofA noted, the highest in seventeen months. In fact, since August of last year, global equity allocation has risen from 12% underweight to this month's current tally, the biggest increase in nearly a decade.

With an optimistic backdrop to the current earnings season, and a sharp response to what could be a dangerous health crisis in Asia, U.S. equity futures were able to climb modestly higher in the overnight session, pointing to a positive open on Wall Street later today.

Contracts tied to the Dow Jones Industrial Average are indicating a 120 point advance for the 30-stock average, while those linked to the S&P 500 suggest an 13 point gain for the broader benchmark. 

European stocks opened firmer in London and Frankfurt, as well, with the Stoxx 600 benchmark rising 0.05%, paced by a 0.1% gain for the DAX performance index in Germany, and Britain's FTSE 100 rising 0.2%.

Overnight in Asia, China's coronavirus response, as well as last night's after-the-bell earnings on Wall Street, helped Japan's Nikkei 225 to a 0.75% session gain that closed the benchmark at 24,031.35 points and lifted the region-wide MSCI ex-Japan index to a 0.8% gain heading into the close of trading.

The U.S. dollar index, which tracks the greenback against a basket of six global currencies, was marked 0.1% higher at 97.625, while benchmark 10-year U.S. Treasury note yields held under the 1.8% mark at 1.787%.

Global oil prices continued to drift lower, even after yesterday's declaration of 'force majeure' on deliveries from two major oilfields in Libya, as investors extended bets that record U.S. production rates would offset temporary supply constraints in other markets. 

Brent crude futures contracts for March delivery, the global benchmark for pricing, were last see seen 38 cents lower from their Tuesday close and trading at $64.21 per barrel, while WTI contracts for the same month, which are more tightly-linked to U.S gasoline prices, were marked 44 cents lower at $57.94 per barrel.