Overnight: Coronavirus Pulls Stocks Down

News of the coronavirus spreading inside China and elsewhere, including into Australia, unsettled financial markets overnight.

Greg Peel will resume writing the Overnight Report after Australia Day (next week). In the meantime, Jessica Amir from Bell Direct is providing a snapshot of insights and developments from overseas markets overnight.

By Jessica Amir, Bell Direct

The Australian share market is eyeing a cautious start to Wednesday’s session, after US stocks retreated from record levels ending their six day winning streaks, on news that the deadly coronavirus, which has killed 6 people in China, has spread to the US, Thailand, South Korea, Japan and Taiwan.

Shares in casino and hotel companies fell sharply with the likes of Las Vegas Sands falling -5% and Wynn Resorts down -6%, on fears that the outbreak would dent China international travel numbers. Airline stocks also fell on the news, with United Airlines and Delta Air down -5%, along Boeing (but Boeing had issues of its own with 737 Max regulator delays).

Meantime, it was the first day of trade for the US after a long weekend (to celebrate Martin Luther Jr Day) and investors reacted to the IMF downgrading global growth by -0.1% to 3.3% in 2020, largely as India’s economy slows (India’s expected growth dropped by -1.2% (to 5.8%)).

Even though global growth forecasts ticked higher than last year’s 2.9% recorded growth, the IMF’s chief economist Gita Gopinath said the projected recovery in global growth remains uncertain. The IMF said as the US-China trade deal was inked, trade and manufacturing activity could soon bottom out.

Markets

On Wall Street, with investors locking in profits, the Dow Jones lost -0.5%/152 points, S&P500 slipped -0.3% and Nasdaq lost -0.2%. The market has already carried momentum from 2019 to this year, with the S&P500 up around 3%, following the 28% lift last year. This was its biggest annual gain since 2013.

European markets were also mostly lower on China virus concerns. The Stoxx 600 lost -0.14%, the CAC lost -0.5%, while the German DAX rose 0.1%

In Asia, stocks in Hong Kong led markets lowers after Moody’s cut its rating for the city to Aa2 from Aa3. While in Japan, the BOJ’s short-term policy rate remained on hold at -0.1%, also keeping its 10-year bond yield target at 0%, largely in line with forecasts. Japan’s Nikkei ended -0.9% lower, Hong Kong’s Heng Seng lost -2.8%, and China’s Shanghai Comp lost -1.4%. 

The Aussie share market futures are suggesting a 0.1%/9 point gain. Yesterday we saw the benchmark index, ASX200 lost -0.2% or 13 points, ending the five-day winning streak before closing at 7,066 points, and almost wiping out Monday’s gains. Year to date, the market is up 5.7%.

Gold shed -1% falling to US$1,557 an ounce, as investors booked profits as the commodity hit a two-week high ($1,568) earlier on news of the virus outbreak.

Oil fell -0.3% to US$58.25 a barrel, with Libyan exports remaining halted as the nation’s crude remains under military force. The IMF maintained its 2020 forecast for WTI Crude of US$57 and Brent at US$62.

Iron ore last traded at US$94.81 a tonne, holding onto that weekly 1.3% gain.

Australian dollar trading at a weekly low of 68.73 US cents.

The Australian share market over the past thirty days…