Trade of the Day: Stocks edge higher as risk seekers tiptoe back in; US Treasuries, German bunds on backfoot.
Quote of the Day: “Imposing the travel restriction [in China] may be necessary, but it has also sparked market concern that the actual situation could potentially be more severe than announced. Unlike 2003, social media (Wechat and Weibo) have played a major role in the dissemination of information and there is also growing concern that there may be more negative newsflow, given the CNY golden week holiday,” said Jefferies analysts in a note. “Given the travel restrictions, the biggest risk that we see to economic growth post the golden week (CNY) is the return of industrial activities (migrant workers) and the distribution of goods and services.”
Stock of the day: Koolearn Technology Holdings rose as much as 11% after UBS raised its target price. The stock has risen 28% in the past two weeks.
Number of the Day: $31.5 million. JPMorgan Chase CEO Jamie Dimon’s pay cheque for 2019. He is now Wall Street’s best paid bank boss for the fifth year in a row.
Tip of the Day: Buy the Chinese yuan versus the Philippine peso, say HSBC strategist in a note issued on Friday. “The US and China have signed a ‘phase 1’ economic and trade agreement. We believe USDRMB may fall further in the near term as the market’s optimism about ‘phase 2’ talks and greenshoots in China’s growth may overshoot temporarily. There have been relentless inflows into China’s equity markets.” The analysts said the prospects for the PHP look dim on the other hand – both in the near term and in 2020 as a whole. “Normalizing fiscal spending should cause the current account deficit to re-widen modestly this year. We also note that the PHP’s yield advantage has already narrowed in 2H19 and the BSP remains dovish.”
European indexes built on gains eked out by Asian markets after the World Health Organisation said the virus outbreak from China was not a medical emergency for the rest of the world yet. “Make no mistake. This is an emergency in China, but it has not yet become a global health emergency. It may yet become one,” warned WHO director-general Tedros Adhanom Ghebreyesus.
European stocks got an additional boost from upbeat German and UK data, with the purchase managers index in both countries showing a pick-up indicating recovering economies.
“UK economic data this week has shown a better than expected recovery following the outcome of last month’s election, making a rate cut next week less likely. Sterling rallied to a 5-week high above 1.19 versus the Euro in the lead up to the PMI data release, as a combination of weaker euro zone PMI data and market expectations of stronger UK surveys drove demand for the UK currency,” said Andy Scott, Associate Director at JCRA, an independent financial risk advisor.
However, sterling did drop around half a percent after the data, reflecting the fact that the chance of a rate cut is still 50/50.
“Today’s UK PMI leaves us in no-man’s land. 52.4 (consensus 50.7, BofAe 53.0). It’s not strong enough to rule out a January rate cut but neither is it weak enough to guarantee a cut. So we are left trying to figure out what side of the bed 9 rate setters will get out of next Thursday,” said BofA analysts in a note following the PMI data.
“We now expect a 25bp cut in January (previously May), justified as an ‘insurance cut’. We stick with our call for a second cut in August. The risks to the latter skew to an earlier cut, especially if PMIs do not gain further in February.”
Futures on S&P 500 Index added 0.2%, Nasdaq 100 Index futures advanced 0.3% and the Stoxx Europe 600 Index jumped 1.2% after the upbeat German and UK numbers.
Earlier, the MSCI Asia ex-Japan index and the Nikkei both ended up 0.13% after Australia’s S&P ASX 200 clawed into positive territory and Hong Kong’s Hang Seng benchmark added 0.15% lead by advances in telecoms, healthcare and utilities.