Please find the latest edition of Weekly digest, on the topic of the coronavirus.
The fear-factor has continued to dominate market sentiment today, with the spread of the coronavirus weighing on equity and commodity prices, whilst safe haven assets such as gold and the Yen have rallied. It is worth remembering that the World Health Organisation has not yet declared this a global emergency and the death toll so far is only a fraction of the 800 killed in the SARS epidemic in 2003, though SARS did not peak until 3 – 4 months after the first cases were reported. The Nikkei closed 2% lower this morning and, at the time of writing, the US S&P 500 index is down 1.2%. Travel and Resources companies are among the biggest fallers, along with any China or Hong Kong exposed names.
Resource prices have been hit amid concerns about the potential impact on global GDP if the outbreak persists and indeed widens. At the moment, Brent crude oil is trading down 2% and is back below $60 per barrel.
Beyond the inevitable headline-grabbing by the coronavirus and Donald Trump’s impeachment trial, it is a busy week ahead in terms of macroeconomic and corporate news flow. The Federal Reserve’s first meeting of the year concludes on Wednesday, but the market is pretty confident that there will be no change to US interest rates as a result. The Bank of England’s monetary policy meeting on Thursday looks set to be more closely contested following a slew of sluggish UK economic data for December, which saw the market pricing in a 2/3 chance of a rate cut. However, fast forward a fortnight and the more timely data shows signs of a post-election rebound in activity, to the point where the market is expecting no change to rates. In fact, the UK’s manufacturing and services data released on Friday was better than expected. And, of course, on Friday at midnight the UK will leave the EU.
It is a busy week of corporate results ahead, with 145 of the S&P constituents updating. We have some high profile names scheduled to report in the US, including Apple, Microsoft, Facebook, Paypal, Amazon and Visa. Closer to home, we have LVMH on Tuesday followed by Diageo and Unilever on Thursday.