Concerns over the spread of the coronavirus outweighed strong earnings reports to send US stocks lower on Friday. With cases of infection having been confirmed in France as well as Australia, fears grew that the continued spread of the virus may disrupt travel and trade as well as slow economic growth. The DOW closed 0.58% lower on the day (down 1.2% for the week) while the S&P shed 0.90% (down 1%). A strong earnings report by Intel – up 8.13% on Friday – was not enough to move the NASDAQ higher as it closed 0.93% lower and 0.8% down for the week. Treasury yields were lower with 2Y and 10Y yields closing at 1.4947% and 1.6839% respectively.
The UK economy appears to have reacted well to the Tory majority in the December election according to the latest IHS Markit data. The Composite PMI for January came in at 52.4 from 49.3 in December with services and manufacturing having both improved in the month. Consumers also seem to have reacted well with activity in the housing market having picked up and car sales having risen in December. The data comes ahead of the Bank of England’s monetary policy meeting on Thursday and with four of the nine-member monetary policy committee having made a case for rate cuts, it remains to be seen whether the latest figures will sway them. The pound closed weaker at $1.3073 while yield on 10Y and 30Y UKTs closed lower at 0.563% and 1.066% respectively.
Italy’s League Party suffered a defeat in the Emilia-Romagna vote on Sunday with Interior Ministry figures early Monday showing the Democratic Party leading with 51.3% of the vote while the League Party trailed with 43.8% of the vote. League leader Matteo Salvini had hoped to leverage on his rising popularity to take away the vote in the traditionally leftist stronghold and in turn deal a blow to the Democratic Party-Five Star Movement Coalition. Yield on 10Y BTPs was trading 15bps lower on Monday having closed at 1.227% on Friday. The euro closed lower at $1.1025.
With most Asian markets closed for holidays, the NIKKEI took the brunt of souring investor sentiment over fears of the spread of the coronavirus. As at Sunday, over 2,700 cases had been confirmed in China with the death toll at least 80. The Japanese bourse slid further from early lows of -1.8% to close 2.03% lower.
Brent dropped below $60 a barrel for the first time in 2020 as concerns over the coronavirus continued to grow. Following warnings by Chinese authorities that the spread of the virus could accelerate, the international benchmark fell as low as $58.68 in Asian hours having closed at $60.69 on Friday. Saudi Arabia’s Energy Minister Prince Abdulaziz bi Salman Al-Saud said OPEC+ would respond to any developments as needed as he sought to downplay the impact. Monday’s slide came even as reports surfaced that the US embassy in Iraq had been struck by a rocket over the weekend.
Brazil expects to continue with the 2019 momentum in job creation after posting the highest number of new jobs in six years. Government data showed 644,079 jobs were created in 2019 compared to 529,554 in 2018 with Labor Secretary Bruno Dalcolmo saying a million more new positions could be added this year if growth reaches 3%. Services led the with some 380,000 new jobs with retail in second having created about 145,000 positions. The real closed weaker at 4.1826 to the dollar while BRAZIL 50s was flat in the low 101s.
The Central Bank of Nigeria increased the cash-reserve requirements for banks for the first time in almost 4 years in a bid to tame inflation. Addressing reporters, Governor Godwin Emefiele said the move to increase the cash parked at the central bank to 27.5% from 22.5% was meant to mop up excess liquidity. The announcement was made as the monetary policy committee resolved to leave the benchmark rate at 13.5%. Analysts predict that as much as one trillion naira ($2.8 billion) could be mopped up from the system. The naira closed weaker at 362.13 to the dollar while NGERIA 49s was about flat, trading in the high 112s.