The coronavirus crisis originated in China continues to dominate the trading trends. The Chinese stock has gone down almost 8% due to the outbreak while the yuan weakened past the 7 per dollar mark. In fact, its impact has been felt among traders quite more significantly than that of Brexit Day, which in turn it had no impact on markets on the day itself. In the crypto space, major cryptocurrencies maintain the positive trend with Ethereum and XRP experiencing upward shifts.
On the first day back trading after the extended Lunar New Year holiday, investors fled Chinese stocks en masse, according to social investment network eToro. The Shanghai composite was down almost 8%, thousands of stocks hit their 10% daily limit loss and the yuan weakened past the 7 per dollar mark. Commodities have also had a tough time over fears of the outbreak denting China’s demand, particularly oil which was trading at 12 month lows, close to a key level of support.
China responded by cutting interest rates, injecting 1.2 trillion yuan worth of liquidity into money markets and limiting short selling. It’s clear this move from the central bank, as well as the rush to build hospitals and other facilities to control the outbreak, indicates Beijing’s urgency to limit the total damage of the outbreak both as a medical hazard but also economically.
A fresh inversion of the US 3-month and 10-year yield curves have also begun to fuel speculation that the Federal Reserve may have to consider further cuts of their own. The S&P, Dow and Nasdaq futures are indicating a ~0.3% higher open.
US stocks see 2020 gains wiped out after shares sink
US shares plunged by around 2% for the second time in a week on Friday, taking the S&P 500 and Dow Jones Industrial Average into negative territory in 2020 so far, thanks to a continued escalation of the coronavirus epidemic. Beyond the epidemic, it’s worth noting that last week was also a big one in terms of US corporate earnings. Of the companies in the S&P 500 that had reported by Thursday, 62% have topped earnings expectations according to Credit Suisse. Companies including Amazon, Apple and JPMorgan have posted big earnings beats, and there is a chance that overall Q4 corporate income might have improved year-over-year (something that did not happen in the first three quarters of 2019).
S&P 500: -1.8% Friday, -0.2% YTD
Dow Jones Industrial Average: -2.1% Friday, -1% YTD
Nasdaq Composite: -1.6% Friday, +2% YTD
Coronavirus slide overshadows Brexit day
UK shares were also dented severely by the coronavirus last week, with the FTSE 100 dropping 1.3% on Friday after the first two UK cases of the virus were confirmed. The news came as the UK officially left the European Union on Friday night. While having no impact on markets on the day itself, it does put a sharp focus on the tight time period the UK now has to negotiate trade deals. In 2020 so far both the FTSE 100 and FTSE 250 are now down 3.4%. British Airways cancelled direct flights to and from China, and shares in International Consolidated Airlines Group sank 8% over the course of the week. Even budget airlines easyJet and Ryanair, which have no direct exposure to China, found themselves in the firing line – falling 6% and 2% respectively – due to concerns that the epidemic will lead to a broader drop off in international travel.
FTSE 100: -1.3% Friday, -3.4% YTD
FTSE 250: -0.7% Friday, -3.4% YTD
Crypto corner
Cryptoassets remain on the positive run as it has seen them either set, or trade near multi-month highs. Having jumped to $9,500 on Friday, Bitcoin remains close to that level, trading at $9,312 this morning.
Meanwhile Ethereum and XRP also experienced further shifts upwards, with Ethereum up at $188.4 this morning having passed through $190 for the first time since November over the weekend. XRP made it above $0.25 before dipping marginally to trade at $0.247 this morning.
Likewise, Bitcoin usage has gone up among merchants recently, which is great news for cryptoasset enthusiasts as one of the key criticisms of Bitcoin is that you can’t actually spend it. However, the numbers tell a different story. Coinbase Commerce processed $135 million worth of cryptocurrency payments for merchants in 2019, with many actually citing they prefer to receive payment in crypto as it’s more secure. Whilst this number will be dwarfed by total credit card payments and crypto speculation volume for the foreseeable future, it’s positive to see this stream of crypto adoption take a major step forward.
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