Oil prices and Asian stock markets fell sharply on Monday following a surge in new coronavirus cases in Italy, South Korea and Iran over the weekend that heightened concerns over the global impact of the virus. The price of brent crude, the international oil benchmark, fell as much as 3.4 per cent to $56.53 a barrel in Asian trading, while S&P 500 futures were down 1.3 per cent. Gold, viewed as a safe-haven asset for investors, increased as much as 1 per cent. Confirmed cases of the virus in South Korea rose to 763 with seven related fatalities. Iran, meanwhile, has reported eight coronavirus deaths but only 43 cases, implying that the spread of the illness there could be far greater than captured by official screening. In China, where almost 2,600 people have died, the official mortality rate from the Covid-19 virus is just over three per cent of those infected.
Berkshire Hathaway’s Warren Buffett on Saturday stood by his decision to plough ever greater sums of the company’s cash pile into stocks as he struggled to find multibillion-dollar acquisition targets, after a year in which the sprawling conglomerate suffered its worst performance against the broader market in a decade. The so-called Oracle of Omaha told Berkshire stockholders in his annual letter that his ability to find quality companies to buy outright at the right price was “rare”. Instead the company’s equity portfolio, which counts shares in blue-chip groups such as Apple and American Express, has continued to grow. “Far more often, a fickle stock market serves up opportunities for us to buy large, but non-controlling, positions in publicly traded companies that meet our standards,” he said.
The US 30-year bond yield tumbled to an all-time low on Friday as intensifying fears over the spread of coronavirus outside China sent investors rushing to safe assets and prompted fresh warnings from global health officials. The yield on long-dated US Treasuries dipped below 1.9 per cent amid a global bond rally, with investors betting that the economic impact of the virus could drive the Federal Reserve to cut interest rates this year. “We are now expecting the coronavirus to have a longer impact on global growth,” said Dickie Hodges, a portfolio manager at Nomura Asset Management, who has a quarter of his fund in US government bonds. “The US is one of the few places that has room to cut rates, and I think they will cut at least twice this year. In that environment you want to own Treasuries.”
Morgan Stanley has become the latest elite Wall Street bank to turn to Main Street for its future growth, adding stock trading millennials to its customer base with the $13bn acquisition of online trading platform ETrade. The deal — the largest by a global bank since the financial crisis and the second biggest by Morgan Stanley — comes as rival Goldman Sachs chases American consumers with its mass market wealth management business and online bank. It also comes at a time of consolidation in the US wealth management market, most notably November’s $26bn merger between ETrade’s rivals Charles Schwab and TD Ameritrade, in the wake of falling fees from stock trading. “This was our preferred partner always,” James Gorman, chief executive of Morgan Stanley, told the Financial Times.
Apple has warned that disruption in China from the coronavirus will cause its revenues to fall short in the current quarter, marking the second time in little over a year that weakness in China has forced the world’s most valuable technology company to issue a financial alert. The US consumer tech company said that it had assumed that work would return to normal in China after the new year holiday that ended on February 10. Instead, it said it was “experiencing a slower return to normal conditions than we had anticipated”, leading it to warn that it will not meet the revenue guidance issued at the end of last month. Apple’s warning will send waves across Wall Street, which had already started to look past the continuing coronavirus crisis. Following its earnings report at the end of January, Apple’s shares have traded close to their all-time highs, valuing the company at more than $1.4tn as of Friday’s close.
Japan’s economy shrunk at a 6.3 per cent annual rate in the fourth quarter after last autumn’s rise in consumption tax, raising fears of a deeper slowdown and putting pressure on Shinzo Abe and the Bank of Japan to mount a policy response. The contraction was far worse than the 3.7 per cent forecast by analysts, and similar to the slump after a previous consumption tax rise in 2014. The dismal figures suggest that stimulus measures to cushion the effects of the tax rise were ineffective. With demand in Japan now suffering a fresh hit from the coronavirus outbreak, it points to a rocky economic outlook for the rest of the year.
A surge in the dollar to a four-month high against other currencies has added another potential headwind to US growth, as the Federal Reserve weighs the risks to the economy of the intensifying coronavirus outbreak. Since investor concern about the impact of the outbreak began to move financial markets four weeks ago, the dollar has climbed 1.65 per cent against a basket of other major currencies. The currencies of emerging market countries, whose fortunes are most closely linked to the Chinese economy, have shed 2.36 per cent over the same period, according to a JPMorgan index. Tom Lee, head of research at Fundstrat Global Advisors, said the dollar’s attraction as a safe haven currency introduced a risk to the US economy on top of any disruption caused by the coronavirus outbreak itself.
Beijing faces growing calls for it to stop suppressing free speech following the death of a Chinese doctor who was punished for his early warnings of the coronavirus epidemic, as the death toll surpassed that of the 2002-2003 Sars outbreak. China’s National Health Commission said on Sunday that 89 people had died as a result of the coronavirus epidemic over the previous 24 hours, setting a new record for fatalities in such a time period. The number of people who have died is now 814, overtaking Sars, which killed 774 people. A US citizen was revealed as the first non-Chinese victim of the virus on Saturday. The latest jump in fatalities comes during a public outcry over the death on Friday of Li Wenliang, a Wuhan-based ophthalmologist. He was disciplined for sounding the alarm on the virus before himself falling victim to it. More than a dozen prominent scholars have now called for Beijing to stop suppressing free speech — a rare showing of such public discontent with China’s authoritarian leadership.
China has announced it will halve tariffs on some US imports as it moves to implement a “phase one” trade deal with the Trump administration and cushion the economic fallout from the coronavirus epidemic. The move spurred a rally on global stock markets with Asian bourses rallying from deep losses on mounting concerns over the impact on China from the virus. European shares also gained ground while the US market opened higher. The finance ministry said tariffs on some goods would be cut by half, from 5 per cent to 2.5 per cent or 10 per cent to 5 per cent, on February 14, the same day that last month’s agreement between the two countries is set to take effect. The reductions apply to punitive tariffs imposed on 1,717 US products by China in September.
Donald Trump was acquitted on impeachment charges by the Senate on Wednesday, but was denied the full support of Republicans as Mitt Romney became the first senator in US history to vote to convict a president from his own party. The president was acquitted by a vote of 52-48 on the first charge of abuse of power, as Mr Romney voted with Democrats. The Senate found Mr Trump not guilty on a second charge of obstructing Congress by a party-line vote of 53-47. Mr Trump’s acquittal had been long expected — a two-thirds majority is required to remove a president from office — but the dramatic rebuke by the senator from Utah gave bipartisan credibility to an impeachment that was otherwise steadfastly opposed by the president’s party.
Tesla shares extended a vertiginous rally that has made the company the world’s second-largest carmaker by market value, despite losing the backing of Saudi Arabia’s giant Public Investment Fund and attracting new attention from one widely-followed short-seller. A late sell-off trimmed Tesla’s advance to 13.7 per cent for the day and a still-record close of $887.06, a moved that added about $20bn in market capitalisation, or roughly the value of Fiat Chrysler. At its best, the stock rose as much as 24.2 per cent to $968.99 about 12 minutes out from the closing bell. The stock has more than doubled since the start of the year. The rapid stock price rise continued despite the disclosure that Saudi Arabia’s $320bn sovereign wealth fund had all but eliminated its stake in the electric car maker. The fund held stock worth just $16.4m at the end of December, according to a Tuesday filing with the US securities regulator.
Revenue growth at Google parent Alphabet slowed more sharply than expected in the final quarter of last year, wiping over 4 per cent from the company’s shares in after-market trading on Monday. Most investors had been expecting a moderate slowdown from the heady pace of the third quarter, with net revenue growth of 20.5 per cent. However, Alphabet reported an 18 per cent advance in net revenue to $37.6bn in a holiday shopping period in the US that was shorter than usual. The revenue disappointment was caused almost entirely by a shortfall in Google’s non-advertising businesses, which now account for a fifth of the group total. Growth from these operations, which include cloud computing, hardware and the Play app store, slowed to 22 per cent in the final quarter from 39 per cent in the preceding three months.
Chinese stocks tumbled as traders returned from an extended lunar new year holiday, with the CSI 300 index of Shanghai- and Shenzhen-listed equities falling as much as 9.1 per cent on Monday to mark the worst opening in nearly 13 years. The drop came despite the central bank pumping Rmb1.2tn ($171bn) in additional liquidity into the financial system — its biggest one-day open market operation since 2004 — to help cushion the blow of the country’s deadly coronavirus outbreak. The benchmark index closed 7.9 per cent lower, marking its worst day since August 2015 and more than four-fifths of listed companies were down by the maximum 10 per cent daily limit, according to data provider Wind. The CSI 300’s fall wiped off about $358bn in stock market capitalisation, according to a Financial Times estimate based on Bloomberg data.
|
PurposeMajor markets news headlines which captured the markets. Archives
March 2021
Categories |