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Market Report 2nd March 2020

Market Report 2nd March 2020 981 980 Realm

Markets are recovering first thing this morning on hopes that further stimulus from central banks will help buffer markets from the increasing risk posed by the spread of the coronavirus. A statement from the Federal Reserve opened the door to a rate cut citing the “evolving risks” of the virus.

On Friday, markets ended lower for a sixth straight session, capping their worst week in more than a decade, over fears that the fast-spreading coronavirus outbreak could trigger a global recession. 
  • European stocks tanked extending losses to another session, amid mounting worries about the spread of the novel coronavirus and its imminent impact on global growth. With the focus on news about the spread of the dreaded virus, investors pressed sales, ignoring economic data, earnings and other corporate news.
  • US stocks: After experiencing yet another sell-off early in the session, stocks fluctuated over the course of the trading day. The major averages largely maintained a negative bias, although the tech-heavy Nasdaq ended the day nearly unchanged. For the week, stocks turned in their worst performance since the 2008 financial crisis.
  • Asian stocks followed their U.S. and European peers lower as the coronavirus continued to spread to new countries, exacerbating fears of a global pandemic. China’s National Health Commission reported 327 new confirmed cases and 44 new deaths as of Thursday. South Korea confirmed an additional 256 new coronavirus cases, bringing the country’s total to 2,022. Germany reportedly quarantined around 1,000 people at home in the western town of Heinsberg.

Global Macro

  • Australia’s job advertisements in newspapers and on the internet unexpectedly rose by 0.7% month-over-month to 151,146 in February 2020, easily beating market expectations of a 6.6% slump and following a 3.8% increase in the previous month. “This has been a surprise to the positive side,” said Catherine Birch, a senior economist at ANZ. “However, the past two months of gains weren’t enough to regain levels seen prior to the sharp loss in December and any underlying momentum may stall in the near-term,” she added. On an annual basis, job advertisements fell by 10.2% from the prior year.
  • The Official NBS Manufacturing PMI in China plunged to a record low of 35.7 in February 2020 from 50.0 in the previous month and missing market expectations of 46, amid rapid spread of the coronavirus outbreak that disrupted the country’s supply chain. Output (27.8 vs 51.3 in January), new orders (29.3 vs 51.4) and new export orders (28.7 vs 48.7) all slumped. Also, buying levels plummeted (29.3 vs 51.6) and employment contracted much steeper (31.8 vs 47.5). On the price front, input price inflation slowed (51.4 vs 53.8), while selling price dropped much steeper (44.3 vs 49.0). Looking ahead, business sentiment deteriorated sharply (41.8 vs 57.9).
  • Australia’s job advertisements in newspapers and on the internet unexpectedly rose by 0.7% month-over-month to 151,146 in February 2020, easily beating market expectations of a 6.6% slump and following a 3.8% increase in the previous month. “This has been a surprise to the positive side,” said Catherine Birch, a senior economist at ANZ. “However, the past two months of gains weren’t enough to regain levels seen prior to the sharp loss in December and any underlying momentum may stall in the near-term,” she added. On an annual basis, job advertisements fell by 10.2% from the prior year.
  • Japanese companies cut spending on plant and equipment by 3.5% year-on-year in the fourth quarter of 2019, following a 7.1% rise in the previous three-month period and missing market expectations of a 1.6% gain. It was the steepest decline in corporate capital spending since the first quarter of 2013, as investment of manufacturing firms plunged 9.0% (vs 6.4% in Q3), led by information & communication electronics equipment, transport equipment, chemical & allied products, production machinery, fabricated metal products, and iron & steel. Also, investment of non-manufacturing companies edged down 0.1% (vs 7.6% in Q3) due to real estate, goods rental & leasing, and production, transmission & distribution of electricity. 

Disclaimer:  ‘Where the business have expressed opinions, they are based on current market conditions, they may differ from those of other investment professionals and are subject to change without notice. The information contained within this communication is believed to be reliable but Realm Investment Management Limited does not warrant its completeness or accuracy.

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