The Market Today
China Resumes Business As Coronavirus Continues to Spread
by Craig Dismuke, Dudley Carter
Coronavirus Update: As detailed in the MarketWatch video this morning, three positive trends developed or were confirmed last week with the coronavirus outbreak. First, the virus continues to be primarily contained to mainland China with only a small number of confirmed cases externally. Second, the daily rate of growth appears to have slowed. Third, the case fatality rate remains just half of the SARs fatality rate. Unfortunately, the fatality rate did tick higher over the weekend, which follows the trend we saw with SARs albeit at a lower level. The number of confirmed cases has now grown to 40,623 and the number of reported deaths has risen to 910. This makes coronavirus more deadly through three weeks of reporting than the entire SARs pandemic. To see our updated Coronavirus Chartbooks, please click here.
Quiet Start to Busy Week: There are no economic reports on the calendar today. This week will bring January’s retail sales report (Friday), January’s CPI inflation report (Thursday), several Fed speakers including Chairman Powell’s semi-annual testimony (Tuesday and Wednesday), the Senate confirmation hearings for nominees to the two vacant Fed Board positions (Thursday), and the New Hampshire Primary (Tuesday).
Stocks Struggle Amid Continued Virus Concerns: Global markets struggled to rebound Monday after a four-day equity rally lost momentum during U.S. trading on Friday (more below). Chinese stocks rose to start the week while almost every other major index around the world edged lower. While some businesses in China restarted operations following a longer-than-normal break for the Lunar New Year amid the outbreak, continued concerns are expected to keep capacity well below normal levels. According to the South China Morning Post, a top official from the Ministry of Commerce said companies are “encouraged to resume business on the basis of sound preparation against the pandemic.” The confirmed case count has climbed above 40,000 and lives lost surpassed the final death toll from SARS. China’s CSI 300 rose 0.4% but Asian stocks as a whole declined 0.4%. Europe’s Stoxx 600 was 0.1% lower and while U.S. futures held around unchanged. Global bond yields had inched lower around 7:00 a.m. CT, with the 2-year and 10-year Treasury yields down around 2.0 bps to 1.38% and 1.56%, respectively.
ICYMI – February 7, 2020 Weekly Market Recap: Somewhat confoundingly, global equities shot higher for the first four days as investors brushed off the possible negative economic effects of an increasing number of coronavirus cases and deaths. Chinese stocks sank 9% Monday after reopening from the Lunar New Year break but steadily recovered as Chinese officials signaled they would step in with support. As part of a raft of measures, the government pumped liquidity into the markets and cut the rates charged on the funds. Global markets continued to recover higher following reports of separate teams making possible progress towards a treatment and after several key U.S. economic reports fanned the stubborn optimism. However, the cheerful tone finally checked up Friday despite January’s solid jobs report adding an exclamation point to the week’s positive economic results. Stocks and yields both pulled back into the weekend but finished higher for the week. The S&P 500 set two new records and gained 3.5% while the 10-year yield rose 8.0 bps. Click here to view the full recap.