Opening Bell: Shanghai Index Rises, Futures Waver, Global Stocks Sell Off
Investing.com | Feb 10, 2020 07:15AM ET
- China’s Shanghai Index was the sole Asian benchmark showing gains today, likely due to government stimulus
Earlier today, U.S. futures followed global stocks lower as the still-spreading coronavirus stoked mounting fears of the disease and its impact on world-wide economic growth.
Nevertheless, safe havens such as Treasurys and the yen were lower too, though gold moved higher as the dollar weakened. Bitcoin plunged.
h2 Global Financial Affairs/h2All four major U.S. future indices—for the S&P 500, Dow Jones, NASDAQ and Russell 2000—slumped this morning, though currently they're wavering, having trimmed most of the day’s losses.
Contracts suggest the underlying benchmarks will extend their Friday selloffs when Wall Street begins trading, confirming existing bearish signals. Media and travel firms pulled the STOXX Europe 600 Index to a lower open.
While just about all Asian indices closed with losses today, ironically, it was China’s Shanghai Composite that was the sole green beacon, (+0.5%), in a regional sea of red. That's puzzling since China's economy is most directly impacted by the coronavirus.
Equally baffling: Chinese shares are rising for the fifth straight session, even as global tech giants continue to face the chaos of their China-based suppliers still not being fully operational. Case in point—Zhengzhou-based Foxconn, the world’s leading maker of iPhone (NASDAQ:AAPL) components, is located just a few hundred miles from the virus's ground zero, Wuhan. Thus, even as Apple's primary supplier warned shareholders that the epidemic would keep its work force idle, thereby shutting down production, China’s leading index sees substantial, repeated gains.
Similarly, the offshore yuan strengthened, even though its country of origin continues to face tremendous uncertainty as the virus' death toll climbed to 908 within China and the number of confirmed cases rose to 40,171. Reports indicate that "many doctors believe that deaths and infections from the current epidemic are [being] undercounted in China," due some say to the strain on health facilities; there are also mounting reports of mass coverups.
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We can only guess at the reasons for this market incongruity. Perhaps it's the Chinese government's resolve to provide a safety net in the form of ongoing liquidly. This bullish action seems to imply that investors can be assured that China cares about the economic cost of the current situation. So they're seeking profitable returns by joining the ride.
Yields are up, including for the benchmark U.S. 10-year note, though well below their highs, suggesting the flight to Treasurys may need a breather before continuing, since indicators suggest yields reached oversold levels (overbought Treasurys) and flipped to a bullish posture.
The 50 DMA increased its distance after finding resistance by the 200 DMA.
The U.S. Dollar Index took a step back after a five-day straight rally, though the greenback strengthened vs the Japanese yen.
Gold pushed higher for a fourth day.
Bitcoin, however, dropped as much as 4%. The cryptocurrency is now 3% lower, falling back below the $10,000 level. Its overbought levels are turning around, suggesting an additional decline.
Crude is attempting to remain above the psychologically critical $50 level despite extreme oversold conditions. Expectations for an OPEC-brokered production cut agreement with Russia as a way of bolstering sagging oil prices continue to fade.
h2 Up Ahead/h2- Earnings season continues this week with reports from, among others: MGM Resorts (NYSE:MGM) and Cisco Systems (NASDAQ:CSCO) on Monday; SoftBank (OTC:SFTBY) on Wednesday; Thursday brings results from Alibaba (NYSE:BABA), Nissan (OTC:NSANY), Credit Suisse (NYSE:CS), Airbus (OTC:EADSY), Nestle (OTC:NSRGF) and American International Group (NYSE:AIG).
- Federal Reserve Chairman Jerome Powell delivers his semiannual testimony in Congress on Tuesday and Wednesday; ECB President Christine Lagarde speaks at the European Parliament in Strasbourg Tuesday.
- U.S. Core CPI is reported on Thursday. It’s anticipated to have increased to 0.2% in January, a faster pace than in December.
- On Friday, China and the U.S. are expected lower tariffs on billions of dollars of respective imports, part of the Phase One trade deal signed last month.
- The Stoxx Europe 600 Index fell 0.2%.
- Futures on the S&P 500 Index were little changed.
- The MSCI Asia Pacific Index dipped 0.5%.
- The MSCI Emerging Markets Index decreased 0.3%.
- The yield on 10-year Treasuries fell less than one basis point to 1.58%.
- Germany’s 10-year yield declined less than one basis point to -0.39%.
- Britain’s 10-year yield climbed less than one basis point to 0.573%.
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