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Markets Pull Back From Highs, Davos Begins, Sickness In China Hurts Sentiment

Global markets pull back after reports a new outbreak of coronavirus could spread throughout Asia.
Thomas Hughes
the congress center in Davos with flags of nations at sunrise du

The U.S. Futures Are Down In Early Trading

The U.S. futures are down in early trading as risk-on sentiment reverses. Topping today’s news are reports out of China a new virus could dampen Lunar New Year celebrations. The flu-like coronavirus can cause pneumonia in humans and has already killed six. Chinese officials are worried the illness will spread over the holiday because 100s of millions of people are expected to travel. The Dow Jones Industrial Average is down -0.20%, the S&P and NASDAQ Composite are both down more than -0.30%.

In other news, the Senate has laid out the rules for the impeachment trial of Donald Trump. McConnel will allow voting on documents and witnesses, putting a damper on hopes for conviction. In trade news, Steve Mnuchin says the Phase 2 Trade Deal may not remove all the tariffs that are in place. This news is another blow to those hoping trade would return to normal soon. At this pace, it will be at least three phases of negotiations and many years before all issues are resolved.

There is no economic data today but traders are on alert for central bank news. The FOMC is meeting next week as is the BOE. The BOJ issued their statement today, no change to policy and positive growth outlook through 2021, while the ECB is slated to issue theirs later this week. On the earnings front, the 4th quarter earnings cycle kicks into high gear this week.

European Markets Fall, Travel Stocks Lead

European stocks are falling at midday on Tuesday after the news of China’s health-problem emerged. The FTSE is in the lead with a loss of -0.90% while the CAC and DAX trail. The CAC is close behind with a loss of -0.80% while the DAX is posting a more tepid -0.15% loss. While the Chinese health scare is worrying traders, the big news today is from Davos. The annual economic forum begins today and was kicked off by speeches from Donald Trump and Greta Thunberg. The one advocated for protectionist national policies, the other for quicker action regarding climate change.

In stock news, shares of UBS are down -5.0% after the banking giant missed top and bottom-line expectations. Shares of steelmaker Euraz are also down -5.0% after disappointing investors. At the other end of the spectrum, shares of Hugo Boss are moving higher. The German fashion brand reported better than expected results and gave a favorable outlook.

Asia Plummets, Hong Kong Leads, As Illness Spreads In China

Asian markets are broadly lower at the end of the trading session on Tuesday. The Hong Kong Hang Seng is in the lead with a loss of -2.8% on word of a major downgrade. Moody’s cut the city-state’s rating to Aa2 from Aa3 citing instability within the government. Shares in Shanghai are down -1.41% due to the spreading illness within Chinese borders. More than 300 cases have been reported along with 6 deaths raising concerns of a wider epidemic. With Lunar New Year celebrations beginning soon the cause for concern is real. The Nikkei shed -0.90%, the ASX -0.19%, and Kospi -1.01%.

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