By Lorcan Roche Kelly
There is increasing concern among investors about the spread of the coronavirus in countries outside China, with a spike in infections in South Korea, and deaths in Japan and Iran. The Chinese province at the center of the outbreak reported a sharp drop in new cases after the country again changed the way it diagnoses infections. The economic fallout also continues as automakers prepare for widespread production halts at plants around the world as the shutdown in China is leading to shortages of components. A.P. Moller-Maersk A/S, the world’s largest container shipping company, tried to strike a more upbeat tone by predicting a sharp rebound in trade in the coming months, based on expectations the outbreak may soon peak.
UBS Group AG surprised analysts and investors by announcing the appointment of ING Groep NV’s Ralph Hamers as its next chief executive officer, replacing Sergio Ermotti. Hamers’ term at the Dutch lender saw the bank outperform regional peers, while his time was marred by the money-laundering scandal which led to ING paying a $900 million settlement in 2018. Shares in both institutions were trading higher this morning in the wake of the announcement.
The U.S. dollar has had its strongest start to a year since 2015, with the greenback gaining more than 2.5% on the Bloomberg Dollar Spot Index. One theory for the rise is from strategists at TD Securities who have pointed out that there is a 70% correlation between President Donald Trump’s popularity and the currency since the election, noting that the dollar has been more closely tracking stocks higher, than falling with Treasury yields. They added that the higher the odds for Trump’s re-election, the better that U.S. risk assets, and by extension, the dollar will perform.
Lackluster corporate earnings and investor worries about the coronavirus are putting stocks under pressure this morning. The MSCI Asia Pacific Index slipped 0.6% overnight, while Japan’s Topix index managed a 0.2% gain which was mostly driven by the yen weakening against the dollar. In Europe, the Stoxx 600 Index was 0.4% lower at 5:50 a.m. Eastern Time on weak earnings and some stocks trading ex-dividend. S&P 500 futures pointed to a small drop at the open, the 10-year Treasury yield was at 1.551% and gold was slightly lower.
At 8:30 a.m., weekly initial jobless claims are expected to show a slight increase to 210,000. The Philadelphia Fed Business Outlook is published at the same time. Richmond Fed President Thomas Barkin is the only scheduled central bank speaker today. The European Central Bank publishes an account of its January meeting, which may be of interest for any discussion of possible changes to the bank’s policies. Among the companies reporting earnings today are Hormel Foods Corp., ViacomCBS Inc., and Newmont Corp.