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January 30, 2020
Five Things
Bloomberg

Coronavirus spreads to more countries, Bank of England decision on a knife-edge, and it's another big day for earnings.

Contagion

The coronavirus death toll climbed to 170 with confirmed cases in China rising past 7,700 as the outbreak spread to India and the Philippines for the first time. The World Health Organization is meeting today to consider issuing a global alert. The economic costs of the measures taken to battle the outbreak are starting to show up in industry, with airlines hit as flights are canceled. For other companies that rely on the manufacturing hub of Wuhan the knock-on effects may be delayed because production was already halted for the Lunar New Year. The extension of that holiday however means the impact will eventually be felt. 

Bank of England

Today is Governor Mark Carney's last Bank of England decision as head of the monetary body, and he is going out in dramatic style with markets on a knife edge over whether interest rates will be cut. The decision, announced at 7:00 a.m. Eastern Time, will be accompanied by updated forecasts for the U.K. economy and followed by a press conference 30 minutes later. Coming on the eve of the U.K.'s exit from the European Union, it's likely that questions over the economic outlook will dominate. 

Earnings 

Tesla Inc.'s blowout results saw the company's shares soar as much as 14% after yesterday's close, providing more pain for those that have made the company the most heavily shorted American stock. Facebook Inc. saw its shares slump after it announced results that showed slowing growth. In Europe, Deutsche Bank AG reported another loss. Amazon.com Inc. will also announce earnings today, with analysts still bullish on the stock. DuPont de Nemours Inc., Verizon Communications Inc. and The Coca-Cola Co. are among the other companies reporting.

Markets drop

The respite from virus-driven fears in recent days seems to have evaporated, with stocks falling around the globe. Overnight the MSCI Asia Pacific Index  slumped 1.8% and Japan's Topix index closed down 1.5%. In Europe the Stoxx 600 Index was 0.7% lower at 5:45 a.m. in a broad-based sell-off led by energy stocks. S&P 500 futures pointed to a drop at the open, the 10-year Treasury yield was at 1.568% and oil moved lower. 

Coming up

The first reading of U.S. gross domestic product for the final quarter of 2019 is expected to be little changed from the previous period when the data is released at 8:30 a.m. However, the headline number may mask a slump in consumer spending growth, a critical portion of the economy. Weekly initial jobless claims are also at 8:30 a.m. In Washington the impeachment trial continues in the Senate with the chances of Democrats getting to call new witnesses seeming to dim as the number of Republicans willing to vote with them shrinks, meaning the whole thing could be wrapped up with a vote tomorrow. 

What we've been reading

This is what's caught our eye over the last 24 hours.

And finally, here's what Eddie's interested in this morning

Worries about how the coronavirus will affect the world's second-biggest economy are starting to mount, and as you'd expect commodities are having a rough time. But are they getting ahead of themselves? The facts about the virus are alarming, but few raw materials could reliably expect substantial shifts in demand on what's been revealed so far. Industrial metals are heavily exposed to China, it's true, but that's because the country is at the heart of the global industrial machine. World growth, not just Chinese growth, matter to the demand picture. Yet copper has posted its longest run of declines on record. Brent crude is below $59 per barrel from above $70 at the start of the month. Some commodities will take a hit of course -- think jet fuel -- but right now, barring an exponential escalation of the virus, it looks like raw materials are doing what they always do: vastly overprice new risks. What follows is usually a violent snap back when fundamentals come to the fore.

Eddie van der Walt writes for Bloomberg's Markets Live blog.

 

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