The Thursday Market Minute
- Global stocks slide, while safe-haven assets rally, as China moves to lock-down travel from two of its biggest cities in an effort to contain spread of the deadly coronavirus.
- Air and rail travel from the central industrial city of Wuhan has been banned heading into the Lunar New Year celebrations. as recorded deaths from the virus rise to 16 amid some 600 verified cases.
- European stocks open weaker, while U.S. Treasury note yields fall and safe-haven assets rally amid growing investor concern.
- Global oil prices extend slide as transport restrictions tamp demand and U.S. data shows a surprise increase in domestic crude stocks.
- U.S. equity futures suggest modest opening bell declines on Wall Street ahead of earnings from Procter & Gamble, American Airlines and Travelers before the start of trading and Intel and Skyworks after the close.
U.S. equity futures drifted lower Thursday, while stocks in Asia lead a broader global retreat into safe haven assets, as investors worried that the spread of the deadly coronavirus in China could escalate into a worldwide pandemic.
Authorities in China moved to shut down travel from the city of Wuhan, a central industrial city with a population of around 11 million, in an effort to contain the spread of the virus, which has killed some 17 people amid more than 600 recorded cases.
Citizens of Wuhan, the suspected 'ground zero' of the outbreak earlier this month, will not be permitted to travel by urban rail or commercial airlines heading into the Lunar New Year celebrations, during which officials estimate some 3 billion trips will take place as workers retreat to the countryside for the traditional week-long festival. Nearby Huanggang, with a population of around 7 million, was added to the lockdown list later in the day.
Steep loses in Asia stocks, as well as a weaker opening in Europe, pulled U.S. equity futures into the red in early Thursday trading, although the pullback was capped by stronger-than-expected quarterly earnings from Apple (AAPL) - Get Report supplier STMicroelectronics (STM) - Get Report which will help support the tech and semiconductor sector.
Contracts tied to the Dow Jones Industrial Average are indicating a 66 point decline, while those linked to the S&P 500 suggest a 6 point pullback for the broader benchmark.
GE shares were an early market mover of note and look set to halt a five-day skid linked to its Boeing (BA) - Get Report 737 MAX exposure after analysts at Morgan Stanley boosted their rating and price target on the stock ahead of next week's fourth quarter earnings report.
Data from the Investment Company Institute also suggests passive investment funds are peeling away risk exposure to U.S. markets, with some $70 billion taken out of mutual and exchange-traded funds over the past two weeks, the largest retreat since 2013.
With cash flowing into bond funds at the same time, and investors adopting a risk-off stance heading into the Chinese New Year, safe-haven assets found support in overnight trading, taking yields on benchmark 10-year Treasury notes to 1.755% and lifting the yen to 109.58 against the U.S. dollar.
European stock drifted south by mid-day trading, as well, with the Stoxx 600 falling 0.45% in Frankfurt and Britain's FTSE 100 recording a 0.4% by lunchtime in London.
China shares slumped the most in eight months amid the government's decision to lock-down the city of Wuhan, with stocks in Shanghai tumbling 2.75% and the yuan slipping to a two-week low against the greenback.
The moves followed a 0.98% decline for the Nikkei 225 in Tokyo, which ended the session at 23,795.44 points, and pushed the region-wide MSCI ex-Japan index to 1% decline heading into the final hours of trading.
Global oil prices were also on the back foot, extending a three-day decline amid concerns that transport and travel restrictions would crimp energy demand in the world's second-largest economy. Data from the American Petroleum Institute yesterday, which showed a surprise 1.2 million barrel increase in domestic crude supplies, was also a factor in the ongoing pullback in oil prices.
Brent crude futures contracts for March delivery, the global benchmark for pricing, were last see seen 83 cents lower from their Wednesday close and trading at $62.38 per barrel, while WTI contracts for the same month, which are more tightly-linked to U.S gasoline prices, were marked 90 cents lower at $55.84 per barrel.