Global Fundamental Analysis 24/02/20

OPENING CALL: The Australian share market is expected to open lower. The SPI200 futures contract expected to open down 47 points.


Investors dumped stocks and flocked to traditionally safer assets like gold and government bonds this week as worries grew that the coronavirus epidemic would crimp global growth.


U.S. Treasury yields extended their weeklong slump as investors worried that the economic impact of COVID-19 may not be contained to China, and is spilling over into neighboring regions.  

The 10-year Treasury note yield fell 5.4 basis points to a more than five-month low of 1.470%, contributing to a weeklong decline of around 12 basis points.  


Overnight Summary




Australian Market

Australian shares retreated from the previous day’s record close amid growing coronavirus fears and post-earnings analyst revisions. Nearly every sector lost ground Friday as the benchmark S&P/ASX 200 index closed 0.3% lower at 7139.0.  

Consumer discretionary stocks led losses, with Wesfarmers and Tabcorp dropping 2.0% and 2.3%, respectively. Downgraded Domino’s Pizza slumped 3.0%. Energy was the next worst performer as Viva’s 5.8% jump on the divestment of its REIT stake failed to offset falls by oil companies and a 14% drop by coal miner New Hope Corp. The ASX 200 rose 0.12% over the week.  


US Market

The S&P 500 index fell 1.2% Friday, while the Dow Jones Industrial Average lost 273 points, or about 0.9%. The tech-heavy Nasdaq Composite slipped about 2%. All three indexes are still within 3% of their records. Stock investors have been ebullient in recent weeks, driving major indexes to record after record, while bond investors appear to be exercising more caution, scooping up traditionally safe assets and sending yields down to record levels.  

The mixed signals in markets highlight investors’ struggle to assess the damage that the coronavirus epidemic will have on economic growth around the world as the sickness disrupts consumer spending, manufacturing and supply chains around the world.  



The gold futures price rose by US$28.00 an ounce or 1.7% to US$1,644.60 an ounce. Spot gold was trading near US$1,643 an ounce in late US trade. Over the week gold rose by US$61.90 or 3.9%. Iron ore rose by US70 cents or 0.8% to US$91.80 a tonne. Over the week iron ore rose by US$9.15 or 11.1%


Oil Futures

Oil futures ended with a loss, pressured by a reported rift in the crude-production alliance between Saudi Arabia and Russia, as concerns about the spread of COVID-19 in China and beyond take a toll on expectations for energy demand.  

Prices for the U.S. and global crude benchmarks, however, posted weekly gains, partly supported by efforts by China to stimulate the economy, which eased some concerns over the virus outbreak’s impact on the economy. U.S. government data on Wednesday also revealed a smaller-than-expected weekly rise in domestic crude inventories, along with declines in gasoline and distillate stocks.  



The dollar pared some of its recent gains, making commodities denominated in the U.S. currency cheaper for overseas buyers.  The WSJ Dollar Index, which tracks the dollar against a basket of 16 other currencies, fell Friday after closing at a three-year high a day earlier.  


European Markets

European stocks fell as markets reacted negatively to worse-than-expected U.S. economic data, despite broadly better-than-forecast European figures. The Stoxx Europe 600 and CAC-40 dropped 0.5% apiece, the FTSE 100 backtracked 0.4% and the DAX retreated 0.6%.  


Asian Markets

Hong Kong stocks ended the session lower as the coronavirus epidemic continued to cause jitters in Asian markets. The benchmark Hang Seng Index lost 1.1% to close at 27308.81 after a week of fluctuations. 

Japanese stocks ended lower, weighed by falls in travel and food stocks, despite some gains in technology shares. Tokyo Disney Resort-operator Oriental Land fell 2.5% and beer maker Kirin Holdings dropped 1.4% while e-commerce company Rakuten gains 4.1%. SoftBank Group rrose 2.4% after its U.S. mobile unit Sprint and T-Mobile US agreed on new merger terms. Coronavirus-related news was still closely watched. The Nikkei Stock Average settled 0.4% lower at 23386.74.  

South Korean stocks declined for a second straight session, led lower by tech, chemical and oil-refining companies. The benchmark Kospi closed down 1.5% at 2162.84.

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