Market Talk – January 27, 2020

ASIA:

Global markets slid down on the back of coronavirus concerns in China. Major financial markets around the world have been rocked as an exodus of foreign workers from China intensified fears over the impact of the coronavirus for the world’s second largest economy. Global shares slid as fears intensified over the potential impact of the escalating emergency. Chinese authorities reported more than 2,700 cases and 81 deaths. Major global companies have begun pulling staff from the province of Hubei at the epicenter of the outbreak or imposed travel restrictions on staff across Asia, telling any workers who visited the region to stay at home. Shares dropped on Wall Street and the Dow Jones Industrial Average fell by about 400 points, tumbling from record-high levels recorded earlier this year.

India’s government has announced to sell its entire stake in its national carrier, Air India. A document inviting expression of interest was released on Monday. The document says that any bidder would have to take on around $3.2bn of debt along with other liabilities. This announcement came more than a year after the government’s failed attempt to sell a controlling stake (76%) in the airline which did not attract buyers. For years, Air India has blamed high aviation fuel prices, high airport usage charges, competition from low-cost carriers, weakening of the rupee, as well as a high interest burden for its poor financial performance. The divestment of Air India has been a key agenda for the Indian government, which has been trying to offload loss-making companies and improve its balance sheet in the face of the slowest economic growth in a decade.

The United States wants India to buy at least another $5-6 billion worth of American farm goods if New Delhi wants to win reinstatement of a key U.S. trade concession and seal a wider pact, sources close to the matter told Reuters. Last year US President Donald Trump removed India from its Generalized System of Preferences (GSP) program citing trade barriers. In retaliation, India slapped higher tariffs on more than two dozen US products such as almonds, walnuts, and apples. Ahead of Trump’s visit to India, negotiators on both sides are figuring out terms for a trade deal which will benefit both the countries.

Singapore’s economic, business, and consumer confidence are likely to be affected this year by the coronavirus outbreak considering the situation is expected to persist, Singapore’s Trade and Industry Minister Chan Chun Sing said Monday. Tourism-related sectors are of immediate concern, including travel agents, hospitality industries, food & beverage, retail, and transport. Singapore has so far reported four cases of the coronavirus.

The major Asian stock markets had a negative day today:

  • Shanghai closed
  • Kospi closed
  • ASX 200 closed
  • NIKKEI 225 decreased 483.67 points or -2.03% to 23,343.51
  • Hang Seng closed
  • SENSEX decreased 458.07 points or -1.10% to 41,155.12

The major Asian currency markets had a mixed day today:

  • AUDUSD decreased 0.0066 or 0.97% to 0.6760
  • NZDUSD decreased 0.0058 or 0.88% to 0.6547
  • USDJPY decreased 0.3260 or 0.30% to 108.9450
  • USDCNY increased 0.05342 or 0.77% to 6.98232

Precious Metals:

  • Gold increased 9.55 USD/t oz. or 0.61% to 1,583.88
  • Silver decreased 0.0441 USD/t. oz or -0.24%% to 18.0682

EUROPE/EMEA:

The UK will officially be leaving the EU on Friday at 11 PM, more than three years after the initial poll took place which divided the nation. Since then the UK had three conservatives PMs, with the latest finally being able to seal the deal. The next step for the EU is to create a 30-stage process for a full Brexit which UK PM Boris Johnson wants to be finalized by the end of the year.

In the UK, there is a debate surrounding whether the UK will adopt Chinese technology Huawei for their 5G infrastructure. The US is persuading the UK to not go that route otherwise they will end intelligence sharing.

Another Iranian plane has crashed in Tehran albeit no one was hurt. The plane skid of the runway onto a highway. The cause of the crash is said to be under investigation.

The EU is making plans to deal with the arrival of the coronavirus. There currently have been 14 cases confirmed in the UK, one in Germany, and 4 in Austria.

The major Europe stock markets had a negative day today:

  • CAC 40 decreased 161.23 points or -2.68% to 5,863.02
  • FTSE 100 decreased 173.93 points, or -2.29% to 7,412.05
  • DAX 30 decreased 371.91 points or -2.74% to 13,204.77

The major Europe currency markets had a negative day today:

  • EURUSD decreased 0.0007 or 0.06% to 1.1018
  • GBPUSD decreased 0.0018 or 0.14% to 1.3053
  • USDCHF decreased 0.0018 or 0.19% to 0.9693

Some economic news from Europe today:

Germany:

German Business Expectations (Jan) decreased from 93.9 to 92.9

German Current Assessment (Jan) increased from 98.8 to 99.1

German Ifo Business Climate Index (Jan) decreased from 96.3 to 95.9

UK:

Gross Mortgage Approvals increased from 44.1K to 46.8K

Steel Production (Metric Ton) (Dec) increased from 541.60K to 557.50K

France:

France Jobseekers Total decreased from 3,302.9K to 3,292.9K

US/AMERICAS:

Equities plummeted today amid fears that the coronavirus outbreak could impact global growth. The Centers for Disease Control and Prevention (CDC) confirmed a fifth case of the coronavirus in the US this Sunday. President Trump said the matter is “strongly on watch” and the US has offered China assistance in controlling the outbreak. In the meantime, the US has agreed to evacuate nationals from the embassy in Wuhan, China. Although only five cases have been confirmed, the CDC is currently monitoring over 100 people across 26 states who may have contracted the virus.

Canada also reported its first case of the coronavirus in Toronto, with 19 others under close watch. Chief Public Health Officer of Canada Theresa Tam stated that the appropriate measures have been taken to quarantine Canada’s first infection patient. “Nevertheless it would not be unexpected that there will be more cases imported into Canada in the near term given global travel patterns,” Tam admitted to the press.

Airline shares dropped this Monday amid coronavirus travel concerns. Delta declined -3.37%, American Airlines declined -5.54%, United Airlines declined -5.21%, and Jet Blue declined -2.93%. Travel agencies experienced a loss this Monday as well with Expedia declining -2.73%, Trivago declining -6.55%, and TripAdvisor down -2.69%.

President Trump is expected to sign the United States-Mexico-Canada Agreement (USMCA) into law on Wednesday. Canada is now the only country left to ratify the agreement, which will require bipartisan cooperation. “I am calling on all members of Parliament to support the agreement and to support its entry into force without undue delay,” urged Deputy Prime Minister Chrystia Freeland, who called the deal “a victory for all Canadians.” The Liberal government is expected to table the bill this Wednesday as well.

US Market Closings:

  • Dow declined 453.93 points or 1.57% to 28,535.80
  • S&P 500 declined 51.84 points or 1.57% to 3,243.63
  • Nasdaq declined 175.6 points or 1.89% to 9,139.31
  • Russell 2000 declined 18.09 points or -1.09% to 1,644.14

Canada Market Closings:

  • TSX Composite declined 122.82 points or -0.70% to 17,442.52
  • TSX 60 declined 6.78 points or -0.65% to 1,041.19

Brazil Market Closing:

  • Bovespa declined 3,894.52 points or -3.29% to 114,481.84

ENERGY:

Crude oil dropped close to 4%, with Brent dropping well below the 60 USD a barrel range. The talk on the street is that the new coronavirus is causing concerns over global growth, as China has essentially on lockdown to prevent the spread of the virus. Currently, there are approximately 2,700 confirmed cases.

The oil markets had a mixed day today:

  • Crude Oil decreased 1.22 USD/BBL or -2.25% to 52.9706
  • Brent decreased 1.56 USD/BBL or -2.57% to 59.2258
  • Natural gas increased 0.0081 USD/MMBtu or 0.43% to 1.8771
  • Gasoline decreased 0.0354USD/GAL or -2.32% to 1.4881
  • Heating oil decreased 0.0658 USD/GAL or -3.77% to 1.6764
  • Top commodity gainers: Gold (0.61%), Natural Gas (0.43%),Wheat (0.36%), and Cocoa (0.33%)
  • Top commodity losers: Palladium (-6.24%), Coffee (-3.54%), Copper (-3.33%), and Heating Oil(-3.77%)

The above data was collected around 1:40 EST on Monday.

BONDS:

Japan -0.04%(-2bp), US 2’s 1.45% (-3bps), US 10’s 1.61%(-7bps); US 30’s 2.06%(-6bps), Bunds -0.39% (-2bp), France -0.13% (-5bp), Italy 1.06% (-17bp), Turkey 10.16% (+3bp), Greece 1.20% (-61bp), Portugal 0.27% (-10bp) Spain 0.28% (-7bp) and UK Gilts 0.52% (-5bp).

  • French 3-Month BTF Auction increased from -0.580% to -0.577%
  • French 6-month BTF Auction remain the same at -0.576%
  • French 12-Month BTF Auction increased from -0.576% to -0.575%
  • US 2-Year Note Auction decreased from 1.653% to 1.440%
  • US 6-Month Bill Auction increased from 1.520% to 1.535%
  • US 3-Month Bill Auction remain the Same at 1.530%
  • US 5-Year Note Auction decreased from 1.756% to 1.448%