Trade of the Day: Stocks extend slide as virus spreads; oil and futures down; yen, US Treasuries and gold advance.
Quote of the Day: “Yesterday’s FOMC meeting was abnormally normal… the economy is generally operating at a place that we have referred to as “1.8ish.” Furthermore, job growth is at a level that is creating decent wage growth, but without creating excessive inflation, though the Fed’s preferred measure of generalized price gains (core PCE) should approach the 1.8% level over the next few months. That is still below the Fed’s target level of 2%, however. And indeed, this rate of inflation is also very clearly far from what could be considered overheating conditions, which might begin to influence some form of policy-tightening,” said Rick Rieder, BlackRock’s chief investment officer of global fixed income.
Stock of the day: China Health Group rose almost sevenfold after the company said its product had been certified to have an inhibitory effect on the coronavirus. The stock closed up 388%.
Number of the Day:. $66 billion – size of the mixed-shelf offering filed by Wells Fargo as the lender repurchases shares and pays down debt after grappling with rising costs related to its fake-account scandal that erupted more than three years ago.
Tip of the Day: “The China A-share market presents a unique opportunity for global investors and has many of the ideal characteristics for implementing successful quantitative strategies. China A-share market has many of the ideal characteristics in which quantitative strategies should flourish. It is a liquid market, with relatively low transaction costs, a broad and diverse universe of stocks and high return dispersion. All ingredients that bode well for active strategies,” said Eastspring Investments in a paper issued on Thursday.
Financial markets tumbled on Thursday as investors worried about the spread of the coronavirus, which has already claimed 170 lives. The World Health Organisation’s Emergency Committee meets in Geneva to decide on whether the outbreak constitutes a public health emergency of international concern, and what recommendations should be made to manage it.
The MSCI Asia Pacific ex-Japan index slid 2.53%, the Nikkei 225 was down 1.72% and Australia’s S&P ASX 200 eased 0.33%. But one of the big losers in the region was the Hang Seng. The Hong Kong benchmark lost 2.6% as healthcare, telecoms and technology stocks brought down the index. European stocks have opened on a downbeat note with the Stoxx Europe 600 down 0.7% and Wall Street promises to trade weak with S&P futures lower by 0.6%.
The mood was also downbeat after US Federal Reserve Chairman Jerome Powell said “we would have less room to reduce interest rates to support the economy in a future downturn” if inflation and inflationary expectations continued to drift lower. The US central bank kept interest rates unchanged in line with expectations.
Tai Hui, Asia chief market strategist at JP Morgan Asset Management said the signals indicated the Fed would be on hold for the rest of 2020. “Chair Powell also noted the limited room to deal with the next downturn. This implies the threshold for any policy change, either tightening or loosening, would be high,” he said.
Hui said that as global central banks remained focused on downside risk to growth, instead of upside risk to inflation, the search for income continues. “We expect Asian investors to remain focused on the downside risk from the coronavirus outbreak for now as the number of confirmed cases continue to rise, albeit the majority of them in China,” he said.
As China battles with the virus, the country’s stock exchanges extended their holiday closure. The exchanges also said listed companies, which are supposed to publish their 2019 earnings estimates by January 31, can delay the reports until February 3. The Shenzhen and Shanghai stock exchanges said trading is now scheduled to resume February 3. Both markets have been closed since January 24 for the Lunar New Year holiday and were originally set to reopen January 31.