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Dow Futures Point to Record Highs as Markets React to Slowing Coronavirus Infections

China reported the slowest rate of new coronavirus infections since January 30, suggesting health authorities could be gaining ground on the spread of the deadly disease.

The Wednesday Market Minute

  • Global stocks book modest gains as authorities in China report the slowest increase in coronavirus cases in nearly two weeks.
  • China NHC, however, has changed the way it documents infections, adding only those who show symptoms of the respiratory-focused illness.
  • Asia stocks gain on hopes that China is slowing the spread of the virus, but questions over its economic impact remain.
  • European stocks -- including Germany's DAX index -- hit fresh record highs at the start of trading. 
  • Senator Bernie Sanders wins Democratic primary in New Hampshire, cementing his early lead in the race to challenge President Donald Trump later this fall.
  • U.S. equity futures suggest a higher open on Wall Street ahead of earnings from CVS Health, Barrick Gold and Shopify before the start of trading.

U.S. equity futures suggest fresh record highs on Wall Street Wednesday, while global stocks booked solid gains and investor sentiment showed signs of improvement, as China said the number of new coronavirus infections slowed to the lowest rate in nearly two week, suggesting authorities are gaining ground on the deadly pandemic.

However, optimism was tempered by the fact that health authorities in China have changed the way in which they confirm infections, and will no longer could those identified as having tested for the virus until they present symptoms of the disease.

Still, with new cases rising by 2.015 yesterday, the lowest since January 30, and the number of deaths rising by 97 to 1,113, China's National Health Commission is hopeful that the spread of the virus around the world's second largest economy has peaked.

The broader impact of the virus on China growth, as well as its influence on economies around the world, is yet to be quantified, however, and while investors are adding to equity market positions this week -- lifting markets in Europe, the United States and New Zealand to fresh all-time highs -- defensive assets and the hope of near-term stimulus from major central banks remain two key components of the market's recent moves.

"We are closely monitoring the emergence of the coronavirus, which could lead to disruptions in China that spill over to the rest of the global economy," Federal Reserve Chairman Jerome Powell told lawmakers on Capitol Hill yesterday, adding that there will "very likely be come effects on the United States."

“The question we will be asking is will these be persistent effects that could lead to a material reassessment of the outlook,” Powell said, but told the House Financial Services Committee that he did not know the answer at this stage of the outbreak.

Uncertainty surrounding the strength and impact of the coronavirus in China was matched at home by questions raised from last night's Democratic primary in New Hampshire, where left-leaning Senator Bernie Sanders scored a narrow win over upstart rival Pete Buttigieg, cementing his case as party favorite to take on President Donald Trump in this fall's election.

Poor showings for well-funded candidates Elizabeth Warren and Joe Biden -- each of whom failed to win enough support to earn delegates from the tiny Granite State -- added even more complexity to the early primary season, which heads to Nevada and South Carolina later this month. 

U.S. equity futures, meanwhile, suggest improving opening bell gains for the three major benchmarks, each of which hit brief all-time highs yesterday before retreating into the close of an uninspired trading session.

Contracts tied to the Dow Jones Industrial Average are indicating a 145 point gain, while those linked to the S&P 500 suggest a 15 bump higher for the broader benchmark. Nasdaq Composite futures are guiding to an early 50 point gain for the tech-focused index.

European stocks were also off to a positive start Wednesday, with the Stoxx 600 benchmark rising 0.5% by mid-day trading to a fresh record high, lead to the upside by auto and basic resource stocks. Britain's FTSE 100, meanwhile, edged 0.34% higher as the pound held at 1.2963 against the U.S. dollar, while the DAX performance index in Germany touched an all-time peak with a 0.86% gain.

Overnight in Asia, Japan's Nikkei 225 resumed trading following Tuesday's Foundation Day holiday with investors boosting the benchmark by 0.74% to close at 23,861.21 points. Regional stocks, meanwhile, notched at 0.76% gain as optimism that China is successfully slowing the spread of the coronavirus lifted sentiment.

Global oil prices were also indicating a bullish tone to the overnight developments in China, with prices rising firmly across the board even in the wake of a bigger-than-expected build in U.S. crude stocks, according to data from the American Petroleum Institute, and a cut to the global demand forecast from the Energy Department.

Brent crude futures contracts for April delivery, the global benchmark for pricing, were last see seen $1.10 higher from their Tuesday close in New York and trading at $55.11 per barrel, while WTI contracts for the same month were seen 74 cents higher at $50.68 per barrel.