Global Markets Update Monday, 10 February 2020

Posted on 10 Feb 2020

Global equities ended January on a weak note as the coronavirus outbreak spread, causing countries to shut borders and impose quarantine restrictions on visitors arriving from mainland China. However, stocks bounced in early February on news that China was to halve tariffs on some US imports. Measures taken by the People’s Bank of China to help the economy combat the fallout from the virus also helped boost risk sentiment.

The extended shutdown of Chinese factories started to impact the global supply chain. Toyota, Hyundai, Volvo and PSA, the owner of Peugeot, warned that coronavirus is disrupting their supply chains, while Fiat Chrysler warned that one of its European plants will be forced to halt production in a matter of weeks. Disruption was also expected to the global technology supply chain.

Global market update


The FTSE 100 fell 1.6% over the two-week period.

Three-and-a-half years after the 2016 referendum, the UK left the EU at 11pm on 31 January 2020. Ahead of the start of trade negotiations, Boris Johnson’s government took a hard line, saying that the UK would not align to EU regulations and would leave EU single market and customs union at end of 2020, trade deal or no deal.

Following a raft of better-than-expected economic data releases for January, the Bank of England kept rates on hold at 0.75%.

The final reading of the IHS Markit/Cips composite purchasing managers’ index rose to 53.3 in January, up from 49.3 in December and above the flash reading of 52.4. Service sector activity rose to 53.9, its highest level in 16 months and compared to 50 in December.

Construction activity rose to an eight-month high of 48.4, while manufacturing activity hit a nine-month high of 50.0.

Amid signs of a recovery in the housing market, UK mortgage approvals rose to their highest level in four years in December.


The S&P 500 rose 1.3% over the two weeks. Initially US stocks suffered their steepest sell-off in four months amid growing fears over the impact of the coronavirus, but this was followed by the best weekly performance since June 2019.

The Federal Reserve kept rates on hold but amended its view on household spending to “moderate”. Previously the Fed had described household spending as “strong”. Speculation rose that the Fed would cut rates more than once in 2020 after Fed chair Jay Powell said he was uncomfortable with the current level of inflation, which is below its 2% target. The Fed also warned that “spill-overs” from the coronavirus outbreak pose a fresh “risk” to the US outlook.

The US economy expanded 2.1% in the fourth quarter, the same annualised rate of growth as in the third quarter. Over 2019, the economy expanded 2.3%, down from 2.9% in 2018.

Non-farm payrolls rose 225,000 in January, while average hourly earnings picked up to a year-on-year increase of 3.1%. However, the unemployment rate edged up to 3.6%US continued

The ISM manufacturing purchasing managers’ index rose to 50.9 in January, compared to 47.8 in December. The non-manufacturing index rose to 55.5, the highest level since August.

The Conference Board’s gauge of consumer confidence rose to 131.6 in January from 126.5 in December. That marked its highest level since August.

Durable goods orders rose 2.4% in December, rebounding after a downwardly revised 3.5% decline in November. 

Apple announced record revenue and income for the final quarter of 2019, fuelled by strong demand for its iPhone 11 and iPhone 11 Pro models. However, it issued ‘unusually wide’ revenue forecast for the first quarter of 2020 due to uncertainty related to the coronavirus outbreak. Amazon also delivered strong earnings, boosted by a surge in Amazon Prime membership as well as robust sales growth at its cloud computing arm Amazon Web Services.

Boeing reported its first annual loss in more than two decades as the bill for the 737 Max crisis grounding is expected to surpass $18bn. Caterpillar reported lower sales for the past quarter and forecast worse than expected earnings for 2020. 


The FTSEurofirst 300 ended the two weeks up 0.1%. European equites initially suffered their worst one-day loss since early October on heightening concerns over the coronavirus outbreak, but subsequently rebounded, recording their strongest weekly gain since November 2018.

The eurozone economy expanded by a weaker-than-expected 0.1% in the fourth quarter of 2019. While Spain’s economy grew by a stronger-than-expected 0.5% over the quarter. French GDP shrank 0.1% while the Italian economy contracted 0.3%. 

Headline eurozone inflation rose to 1.4% in January, compared to 1.3% in December. Core inflation fell from 1.3% to 1.1%.

The Ifo survey of German business confidence unexpectedly dropped to 95.9 in January, from 96.3 in December and cooling hopes that the downturn in the export-led manufacturing sector was on track to stabilise. 


The Nikkei 225 closed the two weeks unchanged.

Japanese electronics parts makers and other tech groups with exposure to China, such as Murata Manufacturing, Tokyo Electron and Sharp, fell as a result of anxieties about disruption to supply chains.

Pacific Basin

Chinese stocks fell 9%, their biggest sell-off in more than four years, after traders returned from the Lunar New Year holiday. Chinese stocks subsequently rebounded when the People’s Bank of China pledged it would pump a net 150 billion yuan ($22bn) into its economy to help protect it from the impact of the coronavirus outbreak. Beijing also said it planned to halve tariffs on 1,717 goods it imports from the US. 

Hong Kong moved to restrict travel between the territory and China. Macau-based casino and hotel operators tumbled as the number of visitors to Macau slumped with the gambling centre subsequently shutting all casinos over what it normally its busiest time of year.
Central banks in Thailand and the Philippines cut interest rates by 25bps, saying they expected growth to be lower than expected due to the impact of the coronavirus outbreak. While the Monetary Authority of Singapore left rates unchanged, it acknowledged the potential for currency depreciation to offset the impact on growth. 

Hon Hai Precision Industry, which makes the majority of the world’s iPhones, suffered its biggest share price fall in almost 20 years amid fears that the coronavirus will disrupt the global technology supply chain. Some of China’s largest industrial and manufacturing hubs, including Shanghai, Jiangsu, Zhejiang and Chongqing, extended the lunar new year break by nearly a week for non-essential businesses.

Emerging Markets

Mexico’s economy stagnated in the final quarter of 2019, continuing the zero rate of growth seen in the third quarter. Over 2019, the economy contracted for the first time in a decade. 

Indian equities retreated amid disappointment over the budget which had been expected to deliver measures to boost consumption. The government has also unveiled plans to raise nearly $30bn in the next financial year through privatisation.


Growing demand for safe-haven assets, such as government bonds, has increased the global tally of negative-yielding debt to around $14 trillion. The US 10-year bond yield touched a three-month low of 1.54%, while German 10-year yields hit their lowest since October at -0.44%. The downward movement in longer dated Treasury bond yields means the US yield curve has inverted for the first time since October.

Italian government bonds rallied after the right-wing League Party failed in its bid to unseat the centre-left Democratic party in a key regional election, removing the risk of snap national elections. Italy’s 10-year yield sank to 1.03% - its lowest level in three months.

Global high-yield bond sales totalled $73.6bn in January, exceeding any monthly total over the past 25 years, according to Dealogic  In the US, high-yield issuance reached a decade high in January, but the month ended on a sour note with energy bonds plummeting after the spread of coronavirus hit oil prices.


The Australian dollar fell to its lowest level in 11 years as the growth-sensitive currency was it by fears of the impact of the coronavirus outbreak.

Emerging market currencies were pressured by fears about the economic toll saw investors flee the asset class.


Oil prices continued to fall. Brent crude hit its lowest level in a year, falling below $55 a barrel. Oil has now entered a bear market, having declined 20% since its peak in January amid fears the coronavirus outbreak will hit global demand.

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