The Tuesday Market Minute
- Global stocks extend gains despite coronavirus concerns while analysts slash China growth forecasts as the disease continues to spread.
- China's NHC confirms more than 1,000 deaths and 42,000 cases of the respiratory focused virus, although yesterday's new case total showed some signs of slowing.
- U.S. Treasury curve inverts, suggesting growth concerns from a China-lead slowdown could impact western economies, a condition Fed Chair Powell may address later today on Capitol Hill.
- European stocks hit fresh record highs as the euro trades at the lowest level to the U.S. dollar since late September.
- U.S. equity futures suggest a solid open on Wall Street, and new all-time highs for the S&P 500 and the Nasdaq Composite, ahead of earnings from Under Armour, Hilton Worldwide and Western Union before the start of trading
U.S. equity futures extended gains Tuesday as global investors continued to drive stocks higher even as analysts line-up to slash China growth forecasts as the conronavirus continues to spread through the world's second largest economy.
China's National Health Commission said the number of deaths from the virus, which presents with symptoms similar to that of pneumonia, has risen past 1,000, while the number of new infections has climbed by 42,600, figures which put the disease well ahead of the pace of the global SARS pandemic in 2003.
With factories shuttered, businesses closed and millions unwilling -- or unable -- to travel, China's first quarter GDP will likely slow considerably, or possibly even contract, if the spread of the virus continues to accelerate into March, analysts have cautioned.
That concern is being expressed in safe-haven assets, including U.S. Treasury bonds, where the yield difference between 3-month Bills and 10-year notes turned negative yesterday, an indication that investors are worried that slowing China growth could blunt GDP advances in the United States and elsewhere.
Federal Reserve Chairman Jerome Powell is likely to address that risk later today, when he presents the central bank's annual Monetary Policy Report to the House Financial Services Committee in Washington, although he is unlikely to suggest specific Fed action at this stage.
Still, even with mounting coronavirus risks, alongside weakening factory data from Europe and ongoing trade uncertainty between Washington and Brussels, U.S. equity futures look set to power ahead Tuesday,
Contracts tied to the Dow Jones Industrial Average are priced for a 112 point opening bell gain while those linked to the S&P 500, which has risen 3.75% so far this year to record high of 3,352.09 points, are suggesting a 13 point advance for the broader benchmark.
European stocks were also gaining at the start of trading Tuesday, with basic resource and technology stocks riding a multi-month low of 1.0908 for the euro, helping the Stoxx 600 to a 0.65% mid-day gain after hitting a fresh record high earlier in the session , while Britain's FTSE 100 added 0.77% as the pound held at 1.2820 against a stronger U.S. dollar.
Overnight in Asia, Japan's Nikkei 225 was closed for the country's annual Foundation Day holiday, keeping liquidity in the region thin, while the MSCI ex-Japan benchmark rose 0.95% heading into the close of trading on the back of solid gains for stocks in Hong Kong and Shenzen.
U.S. Treasury bond yields are holding firm, with 10-year notes trading at 1.583% ahead of a busy week for traders that includes $84 billion in new bond sales, including fresh issues of 3-year, 10-year and 30-year paper.
The U.S. dollar index, which tracks the greenback against a basket of six global currencies, was marked 0.03% higher in early European trading at 98.86, the highest since early October.
Global oil prices traded modestly higher, helped in part by firmer equities in Asia and bets that China would boost fiscal stimulus plans in order to counteract the virus-induced slowdown,.
Brent crude futures contracts for April delivery, the global benchmark for pricing, were last see seen $1.11 higher from their Monday close in New York and trading at $54.38 per barrel, while WTI contracts for the same month were seen 98 cents higher at $50.55 per barrel.