The Thursday Market Minute
- Global stocks retreated Thursday as key markets in Asia returned from the Lunar New Year holiday and investors grow increasingly concerned for the human and economic impact of the spreading coronavirus.
- China 170 deaths and more than 7,700 case of the virus, while the WHO meets later today amid speculation it could declare a global health emergency.
- European stocks open firmly lower as economist re-set growth assumptions in China, while Britain's FTSE 100 slumps heading in the final Bank of England policy meeting in Governor Mark Carney.
- Global oil prices extend declines, pulling Brent crude into correction territory, as U.S. inventories rise and China demand forecasts slump as travel restrictions and factory closures in the world's second-largest economy escalate.
- U.S. equity futures suggest a sharp pullback on Wall Street ahead of fourth quarter GDP data at 8:30 am Eastern time and earnings from Verizon, Coca-Cola, UPS and Eli Lilly before the start of trading.
U.S. equity futures retreated sharply Thursday, following heavy losses in Asia and a weaker opening in Europe, as investors grow increasingly concerned for both the potential human and economic costs linked to the spread of the deadly coronavirus in China.
The World Health Organisation is set to meet later today in Geneva amid speculation the agency could label the outbreak as a global health crisis, triggering deeper travel restrictions in and out of the world's second largest economy.
China's National Health Commission, meanwhile, has confirmed 170 deaths and more than 7,700 infections since the respiratory-focused virus was first revealed earlier this year, while authorities in Beijing are adding further travel bans and quarantine rules in and around the central industrial city of Wuhan, where there virus is thought to have passes from wildlife to humans in an illegal food market.
With economists altering forecasts for China GDP sharply downwards, and some markets in the Asia region returning to trading following the Lunar New Year holiday, global stocks are back in the red and shrugging off a series of stronger-than-expected quarterly earnings from the biggest American tech companies.
Federal Reserve Chairman Jerome Powell also cited the coronoavirus risk when he explained that the central bank was still monitoring 'increasing uncertainties' in the global economy, although he and his colleagues held to their view that a 'material reassessment' would be needed on growth and inflation to knock the Fed off its current rate path.
Futures contracts tied to the Dow Jones Industrial Average are indicating a 222 point pullback for the 30-stock average, which has only posted one positive session out of the last six, while those linked to the S&P 500 are suggesting a 28.5 point retreat for the broader benchmark.
The U.S. dollar index, which tracks the greenback against a basket of six global currencies, held near a two-month high of 98.06 after the Fed left its key target rate unchanged at 1.5% to 1.75%, although benchmark 10-year U.S. Treasury bond yields fell to a three-month low of 1.56% in overnight trading.
Both of those levels could be tested later today when the Commerce Department publishes its fourth quarter GDP estimate at 8:30 am Eastern time, which economists expect could show the U.S. economy growing at a 2.1% annualized clip - far south of President Donald Trump's 3% ambition.
Investors will also get before-the-bell earnings from Coca-Cola (KO) - Get Report, Eli Lilly (LLY) - Get Report, Verizon (VZ) - Get Report and UPS (UPS) - Get Report and key readings on weekly jobless claims and the Fed's preferred measure of December inflation.
European stocks open firmly in the red, with basic resource and energy stocks leading the decline as the Stoxx 600 fell 0.7% in Frankfurt and Germany's trade-sensitive DAX performance index slumped 0.84%.
Britain's FTSE 100 was also notably lower, falling 0.9%, heading into the Bank of England's January rate decision later today in London -- the last under the leadership of Governor Mark Carney.
Overnight in Asia, a firmer yen, which rose to 108.81 against the dollar in safe-haven trading, clipped export stocks on the Nikkei 225 and pushed the benchmark to a 1.72% session decline, while heavy losses in South Korea and Taiwan, which re-opened from the Lunar New Year break, pulled the region-wide MSCI ex-Japan index into a 2.26% plunge.
Hon Hai, better known as Foxconn and a key manufacturer in the Apple Inc AAPL supply chain, fell 9.9% to 83.10 Taiwan dollars each as markets re-opened for the first time since the virus was made public.
Global oil prices extended declines, as well, taking Brent crude some 10% lower from when the coronoavirus outbreak was first made public on January 20. Crude, in fact, is now sputtering towards its worst January performance since the early 1990s, as U.S. inventories continue to build and demand forecasts from China -- the world's biggest energy importer -- continue to erode.
Brent crude futures contracts for March delivery, the global benchmark for pricing, were last see seen $1.23 lower from their Wednesday close in New York and trading at $58.58 per barrel, while WTI contracts for the same month were marked $1.00 lower at $52.34 per barrel.