Gold gains on rise in Chinese coronavirus cases
February 13, 2020
“Gold gained on Thursday after a sharp rise in new coronavirus cases and deaths in China dampened risk sentiment, prompting investors to buy the metal. Spot gold was up 0.6% at $1,574.50 per ounce at 1250 GMT and U.S. gold futures were 0.4% higher at $1,577.70. ‘This spike in the numbers has just knocked the wind out of the sizeable bet…So, we are seeing risk markets cool off and gold is catching some bids,’ OANDA analyst Craig Erlam said.
After reports of a decline in new coronavirus cases, China said there had been a record rise in deaths and cases under a new diagnostic method, a potential threat to the global economic outlook. A rally in stock markets reversed after health officials in Hubei reported 242 people had died from the virus on Wednesday, the fastest daily rise so far. The dollar eased from a four-month peak against a basket of currencies, further increasing gold’s appeal. China’s Hubei province also extended a work suspension and asked all enterprises not to reopen before the end of Feb. 20. ‘There will be spillover particularly through big export and import markets … but those impacts are going to be short-term because once people start returning to their normal lives, the economy will bounce back,’ Erlam said.”
MARKET WATCH/Mark DeCambre
Gold prices pop as renewed coronavirus fears buoy haven assets
February 13, 2020
“Gold futures climbed Thursday morning as refreshed worries about a viral outbreak helped to refocus investor worries about the economic implications of the disease, buttressing bullion prices. Chinese health officials changed the method of diagnosing cases of the illness—COVID-19. As a result, there was a sevenfold increase in the number of new cases of COVID-19, the new coronavirus illness that was first identified in December in Wuhan, China.
‘With a plethora of global risk simmering on the back burner—supply chains and demand contraction notwithstanding, it’s too early to downgrade COVID-19 to a nasty case of the sniffles so gold remains a critical defense of the strategy,’ said Stephen Innes, chief market strategist at AxiCorp … Precious metals prices are also benefiting from a slide in rates of government bonds, which have drawn bids due to the reignited fears of viral illness emanating from China and its potential to hurt global economic growth. The 10-year Treasury note yield for example, was down 3.5 basis points to 1.592% … The Dow Jones Industrial Average and the S&P 500 index were also poised to head lower.”
YAHOO FINANCE/Julia LaRoche
Alibaba CEO: Coronavirus is a ‘black swan,’ may affect the global economy
February 13, 2020
“Chinese e-commerce giant Alibaba Group’s CEO Daniel Zhang characterized the widening coronavirus crisis as a ‘black swan event’ on Thursday, warning that the outbreak has potentially global implications. During a call with analysts discussing the company’s fiscal third-quarter results that beat expectations, Zhang said that the coronavirus presents ‘near term’ challenges to Alibaba’s businesses that will have ‘significant impact’ on China and beyond. As the numbers of those affected continue to rise, economists and businesses have made sobering remarks about the outlook for worldwide growth.
On Thursday, Alibaba reported its revenue rose 38% year-over-year during a strong quarter. In the release, Zhang touted the ‘robust growth’ across the lines of business, pointing to a record Single’s Day, increased user engagement, and rapid growth in the cloud computing services. However, the coronavirus remained at the forefront of the company’s remarks to investors. The crisis has roiled markets with the estimated death toll reaching 1,350 and the number of confirmed cases topping 60,000 — most of them in mainland China. ‘In response to the coronavirus, we mobilized Alibaba ecosystem’s powerful forces of commerce and technology to fully support the fight against the outbreak and ensure supply of daily necessities for our communities and introduced practical relief measures for our merchants,’ Zhang said … Both Alibaba and JD.com have seen a surge in online ordering since the virus forced China to mandate quarantines, keeping many citizens homebound.”
U.S. Stocks Hit by Renewed Coronavirus Jitters
February 13, 2020
“U.S. equities declined on Thursday alongside European stocks as officials in China deployed a revised method to diagnose the coronavirus, sending the number of confirmed cases soaring. The S&P 500 Index opened lower, a day after hitting fresh records, as the jump in infections undercut optimism the spread of the virus was slowing.
‘The sudden sharp re-acceleration in new coronavirus infections in China has investors reassessing risk,’ said Alec Young, managing director of global markets research at FTSE Russell. ‘Given the inherent uncertainty of this macro risk, we believe a focus on the bottom line can be helpful. While China and travel-focused companies are obviously most vulnerable, as long as the economic impact on the U.S. economy remains modest, expect U.S. equities to maintain their relative immunity to the virus.’ The Stoxx Europe 600 Index was on pace for its biggest drop this month. The euro traded near the lowest since 2017, while the U.K. pound gained and gilts retreated after Sajid Javid quit as Chancellor of the Exchequer. The FTSE 100 Index also declined. Investor sentiment had improved in recent sessions amid speculation the impact from the coronavirus outbreak on global growth would be short-lived. That assumption was thrown into doubt when Hubei, the province at the center of the epidemic, reported almost 15,000 new cases after it revised its data to include ‘clinically diagnosed’ cases in its daily disclosure.”
MARKET WATCH/Barbara Kollmeyer
Get ready for a stock peak this summer, then a U.S. recession: fund manger
February 13, 2020
“Global appetite for stocks is souring on Thursday after China reported a staggering 15,152 new coronavirus cases due to different methodology, along with 254 deaths. That is nearly a 15-fold increase on Wednesday, when signs of a slowing in the spread triggered a rally on Wall Street and elsewhere. But some say it may also be good news as more reliable numbers may start to emerge and there has also been a shake-up of officials. Elsewhere, our call of the day focuses on brewing troubles for the U.S. economy. It comes from Julien Bittel, multi asset fund manager at Pictet Asset Management, who expects a recession by the fourth quarter of this year. And given a stock market correction has historically taken place in the months before, he has predicted an equity peak this summer.
He sees a lot of similarities between what is happening now and the year 2000—the market peaked in the front half of the year, followed by a recession. Bittel has lots of charts to back up his case, such as one showing Jolts job openings (which measures U.S. job vacancies), at the lowest since the Global Financial Crisis, often a bad omen for employment. He also highlighted trouble for the U.S. long-term business cycle, ‘linked to the less-cyclical areas of the economy so it’s the credit cycle, consumer confidence and the labor markets…these dynamics are all slowing,’ he said … ‘I think investors are a bit naive going into this year, thinking that the gravy trains or rainbows will continue, but in order for that to happen earnings need to come back in a big way,’ said Bittel, noting that 94% of last year’s stock rally was driven by a vigorous rise in prices.”
Investors see stocks overvalued, recession looming
February 13, 2020
“An overwhelming majority of the world’s asset managers think stocks are overvalued and expect a recession this year or in 2021, according to a survey released by the Boston Consulting Group. Many say ‘the current bull market is running on borrowed time.’ The survey of more than 250 asset managers and analysts who oversee $300 billion at firms that collectively manage over $10 trillion shows the continued apprehension of investors from around the globe.
‘The survey, conducted in November and December 2019, found respondents’ outlook is similar to what it was just before the market correction in late 2018.’ Even with stocks racing higher into the end of 2019, market sentiment was ‘nearly identical to what we found in our 2018 survey when we saw a clear shift in sentiment from bullish to bearish.’ The S&P 500 has gone the longest amount of time in history without a 20% decline, or bear market, and that has a lot of money managers anxious — expecting that the good times cannot last forever. BCG’s survey also finds that worries about geopolitical uncertainty are adding to these fears as are the political environment and the upcoming U.S. presidential election. The stock market’s historically high price-to-earnings ratio is the top concern, investors say. 73% of respondents say they see markets as currently overvalued, up from 67% in the 2018 survey.”