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5 things to start your day

February 20, 2020
Five Things
Bloomberg

Investors worry about coronavirus spread outside China, UBS finds a new CEO, and the dollar's strong run continues. 

Contagion

There is increasing concern among investors about the spread of the coronavirus in countries outside China, with a spike in infections in South Korea, and deaths in Japan and Iran. The Chinese province at the center of the outbreak reported a sharp drop in new cases after the country again changed the way it diagnoses infections. The economic fallout also continues as automakers prepare for widespread production halts at plants around the world as the shutdown in China is leading to shortages of components. A.P. Moller-Maersk A/S, the world's largest container shipping company, tried to strike a more upbeat tone by predicting a sharp rebound in trade in the coming months, based on expectations the outbreak may soon peak. 

MovING

UBS Group AG surprised analysts and investors by announcing the appointment of ING Groep NV's Ralph Hamers as its next chief executive officer, replacing Sergio Ermotti. Hamers' term at the Dutch lender saw the bank outperform regional peers, while his time was marred by the money-laundering scandal which led to ING paying a $900 million settlement in 2018. Shares in both institutions were trading higher this morning in the wake of the announcement. 

Greenback

The U.S. dollar has had its strongest start to a year since 2015, with the greenback gaining more than 2.5% on the Bloomberg Dollar Spot Index. One theory for the rise is from strategists at TD Securities who have pointed out that there is a 70% correlation between President Donald Trump's popularity and the currency since the election, noting that the dollar has been more closely tracking stocks higher, than falling with Treasury yields. They added that the higher the odds for Trump's re-election, the better that U.S. risk assets, and by extension, the dollar will perform. 

Markets slip

Lackluster corporate earnings and investor worries about the coronavirus are putting stocks under pressure this morning. The MSCI Asia Pacific Index slipped 0.6% overnight, while Japan's Topix index managed a 0.2% gain which was mostly driven by the yen weakening against the dollar. In Europe, the Stoxx 600 Index was 0.4% lower at 5:50 a.m. Eastern Time on weak earnings and some stocks trading ex-dividend. S&P 500 futures pointed to a small drop at the open, the 10-year Treasury yield was at 1.551% and gold was slightly lower. 

Coming up…

At 8:30 a.m., weekly initial jobless claims are expected to show a slight increase to 210,000. The Philadelphia Fed Business Outlook is published at the same time. Richmond Fed President Thomas Barkin is the only scheduled central bank speaker today. The European Central Bank publishes an account of its January meeting, which may be of interest for any discussion of possible changes to the bank's policies. Among the companies reporting earnings today are Hormel Foods Corp., ViacomCBS Inc., and Newmont Corp.

What we've been reading

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

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

It's always easy to spot the signs of the top in retrospect. The absurd AOL-Time Warner deal was one obviously crazy example of exuberance. But if the internet bubble had burst earlier, maybe the top would have been considered TheGlobe.com IPO, and the founder's plastic pants. In the Big Short, the peak of the housing bubble was demonstrated when a stripper talked about her real-estate flipping. But if the housing market had tanked earlier, then maybe people would have pointed to the launch in 2003 of a popular reality TV show hosted by a real estate celebrity as the sign it was all going to collapse. In 2012, Justin Bieber was on the cover of Forbes magazine, talking about his venture capital prowess, and that seemed like one of those classic magazine cover indicators. And now we know that the tech/VC-industrial complex has grown orders of magnitude since then. The point is, in the midst of any hype cycle it's virtually impossible to know where you are. I've been thinking about this, watching some of the unbelievable action in stocks like Tesla, Plug Power and Virgin Galactic, as folks on the Reddit board r/WallStreetBets pump these names with aggressive options betting. I first came across that board a couple of years ago, and it was mostly people making memes of Lisa Su, the CEO of AMD, which was one of their hot stocks. I thought that was crazy at the time, and surely some sign of exuberance or forth. The lesson is, it can always get crazier.

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