(11 February 2020)DAILY MARKET BRIEF 1:US equities boost sentiment.
US equities flirted with fresh record highs on better-than-expected fourth quarter earnings, and the reassurance that the Federal Reserve is determined to cover their back, come trade war or coronavirus.
More than a third of companies in the S&P500 announced results this far, and their earnings surprised 5.60% to the upside on average. Technology stocks bettered expectations by an impressive 10%, largely enough to boost their market prices. Nasdaq gained 1.13% on Monday, as the S&P500 and the Dow added 0.73% and 0.60% respectively.
Asian equities reversed Monday’s losses, even though the coronavirus death toll topped 1000. Hang Seng surged 1.36%, as stocks in Shanghai (+0.39%) and Sydney (+0.61%) edged higher. Japan was closed due to bank holiday.
WTI crude held ground above the $50 a barrel on improved risk sentiment, although the slightest rise in risk aversion would throw the price of a barrel sustainably below that level.
FTSE (+0.56%) and DAX (+0.78%) futures hint that stocks in Europe are primed for gains at the open as well.
Gold eased to $1566 an ounce, but the pullback should remain limited near the $1550 handle as the risk-off waves due to coronavirus come and go. Investors are probably not ready to unwind their core long positions in gold to keep their hedges solid against the risk of sudden flight to safety.
The US 10-year yield is a touch below 1.57% as Fed Chair Jerome Powell prepares to start his two-day testimony before Congress. Powell will likely mention the increased risks to the economy due to the coronavirus outbreak, but he will probably not make it the focal point of his monetary strategy. We expect Jay Powell to reiterate his wait-and-see position for the coming months. With strong jobs data and sky-high stock prices, there is no pressure to change a winning team.
By Ipek Ozkardeskaya
