Markets in China were weak again. Photo: AFP

Trade of the Day: Shares and futures edge lower; yen and US Treasuries catch safe-haven bid

Quote of the Day: “I had no knowledge of the observation of two former colleagues. It undoubtedly disturbed Credit Suisse and caused anxiety and hurt. I regret that this happened and it should never have taken place,” said Tidjane Thiam, who was ousted as Credit Suisse chief executive in the wake of a spying scandal last year. The bank hired a corporate espionage company to follow Iqbal Khan, its former wealth management head and one-time heir apparent to Thiam, who defected to rival UBS.

Stock of the Day: Sing Tao News Corp rose as much as 6% in a weak market as discussions continued with a potential purchaser regarding, among others, a possible transaction. Sing Tao publishes The Standard newspaper in Hong Kong.

Number of the Day: $20 billion, the size of the buyback demanded by activist hedge fund Elliot Management from the management of technology conglomerate SoftBank. Elliot has built a stake worth $2.5 billion in SoftBank.

Tip of the Day: “While markets will remain unstable until China gets the outbreak under control, equity investors should revisit lessons from previous epidemics … (when) market corrections were relatively brief and comparatively shallow. Market sentiment shifted from initial panic to bargain-hunting when investors gained confidence that the disease had come under control… the snap back from panic to positive momentum can be quick — especially in China’s markets, which are dominated by retail investors,” said John Lin, Portfolio Manager, China Equities, AllianceBernstein.

Financial markets in Asia and Europe weakened as the death toll from the coronavirus rose to 638 while the tally of infections crossed the 31,000 mark, triggering worries about an economic downturn. Australia’s S&P ASX 200 dropped 0.38%, the Nikkei 225 benchmark was off 0.19% and Hong Kong’s Hang Seng benchmark fell 0.33%, led by losses in insurance, energy and utility stocks. Regionally the MSCI Asia Pacific ex-Japan index dropped 0.75%.

China trade data

China’s trade data for January, that was supposed to be released during the day, will be combined with February’s trade data, according to the country’s customs office.

“China delayed the reopening of all offices after the end of the Lunar New Year holidays for a further period until February 10, which is a substantial additional period when all offices have remained closed due to the coronavirus epidemic. Therefore I expect that since all offices were closed for such a long period, it has delayed production of the economic statistics since offices are only scheduled to reopen on Monday February 10th,” said Rajiv Biswas, APAC Chief Economist, IHS Markit.

China’s central bank, the PBOC, revealed that its reserves amounted to $3,115 billion at the end of January, up from $3,108 bn from a month earlier and broadly in line with expectations.

Capital Economics estimated capital outflows of $30 billion in January, up from $15 bn in December.

“The increase in capital outflows probably occurred in the last third of the month after public awareness of the coronavirus outbreak jumped,” Capital Economics analysts said. “The PBOC has leaned against the resulting renminbi depreciation by setting the daily CNY fixing stronger in recent weeks than the rate implied by market movements. We suspect that is may also be intervening indirectly via proxies such as state banks in order to limit the pace of exchange rate declines.”

The pan-European STOXX 600 index fell 0.2% and the S&P 500 futures index edged down 0.1%.

Up ahead, markets will closely study the January jobs report from the US Labor Department.

“The leading indicators are generally positive this month, with three improving (including the truly massive ADP print) and just one deteriorating,” said Matt Weller, Global Head of Market Research at GAIN Capital. He was referring to ISM Manufacturing, ISM Non-manufacturing, ADP employment and the initial unemployment claims data.

“At this point, we’d be remiss if we failed to at least mention the coronavirus: with the NFP (Non-Farm Payrolls) survey taking place in mid-January (and most of the disruption still limited to China in any event), we don’t expect any impact on tomorrow’s jobs report from the virus outbreak. Weighing these factors and our internal models, the data points to a potentially stronger-than-expected jobs report, with headline job growth in the 170k-210k range,” he said.

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