Australian shares are poised to open lower, amid concerns about whether the coronavirus outbreak is set to widen across the globe.
ASX futures were down 47 points or 0.7% to 7039. On Friday the S&P/ASX 200 slid 0.3% to 7139.
Shares tumbled in both Europe and on Wall Street to end the week with investors wary of being caught short over the weekend.
AFR interim profit season calendar: Today’s scheduled results: Bluescope Steel, NIB Holdings, oOh!Media, WorleyParsons, WPP AUNZ
The focus as the week begins is the status of the coronavirus: is the outbreak worsening in China? is there about to be a surge in cases outside of China?
At a news conference on Friday Geneva time, Tedros Adhanom Ghebreyesus, WHO director-general, said he was optimistic the virus could be contained, however his optimism was tempered.
“Although the window of opportunity is narrowing to contain the outbreak, we still have a chance to contain it,” he said.
“If we don’t, if we squander the opportunity, then there will be a serious problem on our hands,” he said.
The yield on the US 10-year government note fell 4 basis points to 1.47%, its lowest since September. The yield on the 30-year fell and reset its record low at 1.886% in the process; it pared some gains to end the day at 1.91%.
“Yields across the board are plummeting as investors are abandoning riskier assets, including stocks,” wrote Oxford Economics’ Bob Schwartz.
“Until recently, expectations of a central bank put gave solace to equity investors. But the market retreat now underway suggest investors are less confident that that a rate cut would be effective in staving off a recession if the disease is not contained soon.”
In a note, Bank of America said its Bull & Bear indicator dropped to 5.7 from 6.5, driven by the biggest outflow from emerging market equities since September 2019.
While big techs tumbled on Friday in New York, BofA said inflows into tech were annualising at $US62 billion v the record $US18 billion in 2017. The latest BofA fund manager survey found tech to be the most crowded trade.
Local: IFO business climate survey February; NZ fourth quarter retail sales volumes, Credit card spending January
Overseas data: US January Chicago Fed national activity index, Dallas Fed index February
ASX futures down 47 points or 0.7% to 7039
On Friday the S&P/ASX 200 slid 0.3% to 7139.
- AUD +0.2% to 66.27 US cents
- On Wall St: Dow -0.8% S&P 500 -1.1% Nasdaq -1.8%
- In New York: BHP -0.5% Rio +0.8% Atlassian -2.1%
- In Europe: Stoxx 50 -0.6% FTSE -0.4% CAC -0.5% DAX -0.6%
- Hang Seng futures +0.3%
- Spot gold +1.5% to $US1643.41 /oz New York
- Brent crude -1.4% to $US58.50 a barrel
- US oil -0.8% to $US53.46 a barrel
- Iron ore +0.3% to $US92.25 a tonne
- Dalian iron ore +2.8% to 675.5 yuan
- LME aluminium +0.2% to $US1713.50 a tonne
- LME copper +0.7% to $US5765 a tonne
- 2-year yield: US 1.35% Australia 0.67%
- 5-year yield: US 1.32% Australia 0.66%
- 10-year yield: US 1.47% Australia 0.93% Germany -0.43%
- 10-year US/Australia yield gap: 54 basis points
From today’s Financial Review
Energy security ‘critical’ as renewables surge: The government’s top policy advisor warned that the rapid influx of wind and solar power poses a “critical” risk to the security of the power grid, at the same time as some solar farms were cut off from the grid because of instability in the system.
The ‘Sanders surge’ a wake-up call for Democrats: The next week and a half are crucial as the left-wing contender closes in on his goal – a takeover of the Democratic Party in the same way that Trump swallowed the Republican Party in 2016.
Frazis Jr makes a fortune where others fear to tread: The 31-year-old Michael Frazis says the market-thumping returns are going to come from companies that look expensive to investors viewing them all wrong.
Wall St slides on coronavirus fears, US business data: Declines were led by the technology sector for a second straight session. Microsoft, Amazon and Apple were the biggest drags on the S&P 500.
Here’s what happened with the big techs: Facebook -2.1% Apple -2.3% Amazon -2.7% Netflix -1.5% Alphabet -2.2% Microsoft -3.2%
Wells Fargo & Co will pay $US3 billion to resolve criminal and civil probes into fraudulent sales practices and admitted to pressuring employees in a fake-accounts scandal.
Wells Fargo will pay the penalties to the US Justice Department and Securities and Exchange Commission and enter into a three-year deferred prosecution agreement during which the San Francisco-based bank will continue to cooperate with any ongoing government investigations, Justice Department officials said.
European shares fell on Friday. The pan-European STOXX 600 index shed 0.5%, ending a volatile week 0.6% lower after two weeks of gains.
Auto stocks led losses, down 1.9% in their worst session in four weeks.
With losses of more than 8% so far this year, the sector is the worst performing among major sectors in Europe, steepening losses since the outbreak as Hubei – the epicenter of the epidemic in China – is an auto manufacturing hub.
Frankfurt’s main index, stacked with car and truck makers, dropped 0.6%.
Business activity in the euro zone accelerated more than expected this month, a survey showed on Friday, in welcome news for policymakers at the European Central Bank.
IHS Markit’s Euro Zone Composite Flash Purchasing Managers’ Index (PMI), seen as a good gauge of economic health, rose to 51.6 in February from January’s final reading of 51.3, beating all forecasts in a Reuters poll which had a median prediction of 51.0.
Anything above 50 indicates growth.
“The euro zone economy managed to pick up some momentum again in February despite many companies having been disrupted in various ways by the coronavirus, which caused supply problems,” said Chris Williamson, chief business economist at IHS Markit.
Demand remained relatively strong, suggesting there won’t be a deterioration next month. The new business index held at January’s seven-month high of 51.3.
Williamson said the survey was consistent with GDP growth of 0.2%, matching the projection in a Reuters poll published this week.
Cracks appear in the cult of Xi: For 30 years, China’s Communist Party has had an unwritten contract with its people: we’ll deliver growth and wealth, you accept one-party rule. Now, the coronavirus is threatening that and Xi Jinping’s plan to rule for life.
The AFR View: The bug in Xi Jinping’s command and control economy: Even if COVID-19 proves intense but short-lived, it could still leave its mark on both world business and China’s politics
Hong Kong stocks ended weaker on Friday to finish the week lower, as worries persisted over the impact from the coronavirus outbreak even as Beijing unveiled stimulus to shore up the world’s second-largest economy.
The Hang Seng index closed 1.1% lower at 27,308.81, while the China Enterprises Index lost 1.1% to 10,790.84 points.
Shanghai stocks closed higher on Friday, with the index marking its best week since last April, as Chinese policymakers vowed to help companies hurt by the fast-spreading coronavirus outbreak.
At the close, the Shanghai Composite index was up 0.3% at 3039.67. The index climbed 4.2% this week, its biggest weekly gain since April 2019.
The blue-chip CSI300 index firmed 0.1% on Friday. It posted a weekly gain of 4.1%, the most since last June.
So far this year, the Shanghai stock index is down 0.3%, while the CSI300 has risen 1.3%. Shanghai stocks have gained 2.1% so far this month.
In Tokyo, the Nikkei share average dropped 0.39% to 23,386.74, while the broader Topix ticked down 0.03% to 1674.00. On the week, the Nikkei was down 1.27% and the Topix fell 1.70%.
Steelmakers, leveraged to Chinese demand, were the worst performer for the week, hit by a surprise decision from industry leader Nippon Steel late last week that it will slash its production capacity by nearly 10%.
Kobe Steel lost 1.5% to a 17-year trough on Friday, following Nippon Steel, which hit similar lows earlier this week.
The market will be closed on Monday as Japan gears up to celebrate the birthday of their new emperor.
Weak $A to aid exporters, crimp overseas travel: People planning an overseas holiday will lament the Australian dollar’s fall below US66¢, but some of Australia’s major exporters will cheer the 11-year low.
Speculators boosted their net long bets on the US dollar to a seven-week high in the latest week, according to calculations by Reuters and US Commodity Futures Trading Commission data released on Friday.
The value of the net long dollar position was $US14.78 billion for the week ended February 18, up from $US13.94 billion last week. That is the largest net long dollar position this year.
China’s iron ore futures rose on Friday, marking their longest streak of gains since June 2016, as concerns over tightening seaborne supplies of the steelmaking raw material pushed spot prices to four-week highs.
Rising for a ninth straight session, iron ore on the Dalian Commodity Exchange posted a weekly gain of 8.4%, the biggest since last September.
Brazilian iron ore miner Vale downplayed an internal report examining the causes of last year’s deadly Brumadinho tailings dam disaster while opening the door to $US1 billion to $US2 billion in fresh provisions related to the collapse.
Three-month copper on the London Metal Exchange (LME) rose 0.7% to $US5765 a tonne in final open-outcry trading after falling as low as $US5684.
LME aluminium added 0.2% to $US1713.50 a tonne.
Canadian miner Teck Resources reported a 76% fall in fourth-quarter adjusted profit, hurt by lower prices for steelmaking coal, its biggest business.
Teck said production at its steelmaking coal operations fell 8.2% to 6.7 million tonnes. The average realised price for the commodity fell by 31%.
It reduced its steelmaking coal sales outlook to between 4.8 million tonnes and 5.2 million tonnes, down from its previous estimate of between 5.1 million tonnes and 5.4 million tonnes for the first quarter of 2020, citing weather-related rail and terminal disruptions in British Columbia.
Teck also said it expects steelmaking coal production for the full-year 2020 to be between 23.0 million tonnes and 25.0 million tonnes.
Blue chip earnings deliver but tech disappoints: Blue chips are rewarding investors by producing results that are justifying their rich valuations, while technology market darlings are facing a reality check.
Would you buy shares from an Instagram model?: Instagram photo shoots, pushy brokers, fat commissions and, too often, retail investors left with big losses: a look inside the dark arts of small and mid-cap stock floats.
Small- and mid-cap gains highlight ‘dangerous market’: Some stocks have soared more than 20 per cent in a day – potentially a warning of overstretched prices and investor euphoria.
A solid run of earnings has pushed the Australian sharemarket higher, with local shares hitting a record high in the middle of the week.
The S&P/ASX 200 Index rose 8.8 points, or 0.1 per cent, this week to close Friday’s session at 7139.
While swinging sentiment on coronavirus plagued offshore markets, the domestic earnings season took centre stage for local investors with a number of stocks reaching record highs through the week.