Trade of the Day: Stocks wilt as virus count rises; US Treasuries, gold and yen rally on safety bid.
Quote of the Day: “The initial reaction has been weaker GBP but we are now seeing a rally to a new high. This is presumably the market interpreting the announcement as Boris [Johnson, UK PM] wanting advisers who are more willing to back aggressive fiscal stimulus,” said Adam Seagrave, head of global sales Trading at Saxo Markets, on UK Exchequer Sajid Javid’s resignation. The pound rose above 1.30 to a dollar after the announcement that Javid will be replaced by Rishi Sunak, chief secretary to the Treasury.
Stock of the Day: Semiconductor Manufacturing International Corporation rose as much as 8.8% ahead of its earnings disclosure, which showed fourth-quarter profits had risen 595%. The company also posted higher margins and indicated elevated margins for the current quarter.
Number of the Day: $4.8 billion. Annual profit at Credit Suisse for 2019, the highest in a decade. Outgoing chief executive Tidjane Thiam said the bumper result is a vindication of his strategy at the bank.
Tip of the Day: “The share prices of liquor and beer sector stocks have declined 1–17% so far this year on the virus panic. We expect share prices in the sector to rebound, firstly on a decline in newly confirmed cases, then on a recovery in sales growth in subsequent quarters, and finally on rolling the earnings focus from 2020 to 2021. We recommend buying quality names. We like Kweichow Moutai and China Resources Beer on near-term sentiment recoveries,” said Jefferies analysts in a note on Thursday.
The financial market rally was derailed by a jump in the virus infections and doubts lingered about the resumption in activity following the Chinese New Year break. While the markets were worried about the headline numbers, with the death tally rising to 1,369 and the infected cases crossing the 60,000 mark, analysts said it reflected the true extent of past infections, rather than indicate a recent acceleration in the spread of the virus.
“If anything, the latest data continue to hint at a slowdown in new infections and a mortality rate lower than initially feared. As such, we don’t think the jump in reported cases will necessarily derail efforts to getting businesses back up and running in the coming days,” said Capital Economics in a report.
The MSCI Asia-Pacific ex-Japan index edged down 0.13% and Japan’s Nikkei 225 inched 0.14% lower, although Australia’s S&P ASX 200 was 0.21% higher as appliance manufacturer and distributor Breville following the company’s better-than-expected half-year result, which sent its shares soaring 28%. Hong Kong’s Hang Seng benchmark was down 0.34% as energy, insurance and consumer non-cyclicals came under selling pressure.
The sell-off in equity markets sparked a flight to safety, which pushed down bond yields and stoked a demand for gold and the yen currency, traditional safe havens.
The Stoxx Europe 600 index is down 0.9% and the S&P Futures are off 0.7%, indicating a weak start at Wall Street.
Up ahead, the US will unveil its CPI data and jobless claim numbers. Dow Jones estimates put the jobless claims for the week to February 8 at 210,000 off the previous week’s nine-month low. The CPI consensus is for the guage having increased 0.2% in January, the same as December. The reading has gained significance after US Federal Reserve Chairman Jerome Powell said in his testimonial to the Senate that a world with lower inflation and lower interest rates “creates a very challenging environment for us to carry out the job you’ve given us.”