Stocks Rebound on Momentum from Positive Earnings
UNITED STATES
US stocks rebounded on Tuesday following the sell-off on Monday, the biggest since October. Positive earnings and positive economic data outweighed concerns over the spread of the coronavirus to lift stocks with Apple notably rising 2.83% on the day after reporting an 11% rise in net profit. Durable goods orders rose 2.4% in December on the back of defence spending compared to a revised 3.1% drop in November. The NASDAQ led gains, up 1.43%, while the S&P and the DOW rose 1.01% and 0.66% respectively. Treasury yields were higher with 2Y and 10Y USTs closing at 1.4625% and 1.6562% respectively.
UNITED KINGDOM
The UK housing market is the latest industry that is showing signs of recovery post the December elections. The latest data from the Nationwide Building Society showed property values rose 1.9% YoY in December, the most since November 2018. Nationwide’s chief economist Robert Gardner however expects house prices to remain largely flat for the next 12 months. The data is one of the last economic reports before the bank of England’s monetary policy meeting on Thursday where markets are pricing a 50% chance of a cut. The pound closed lower at $1.3028 while yield on 10Y and 30Y UKTs closed higher at 0.552% and 1.061% respectively.
ASIA
The HANG SENG resumed trading after the Lunar New Year holidays in the red as stocks reacted to the coronavirus spread; stocks closed 2.82% lower. Elsewhere, markets recovered from losses from earlier on in the week with the NIKKEI closing 0.71% higher while the ASX gained 0.53%. Australia’s inflation picked up significantly in Q4, up 0.7% from Q3 and 1.8% YoY. The rise adds to arguments that the central bank should hold rates at the February 4 monetary policy meeting.
LATAM
Following a 54% rise in consumer prices in 2019, Argentina’s central bank is forecasting a significant slowdown for 2020. In a statement pronouncing its goals for the year, the bank said it is seeking a gradual but sustainable drop in inflation and also noted that excessively high interest rates had failed to curb inflation due to inflationary inertia and a lack of depth in Argentina’s credit markets. The central bank has already cut 13% off the benchmark rate, now at 50%, and policymakers aim to expand the monetary base this year and make credit more accessible to consumers and businesses. The peso closed slightly weaker at 60.1791 to the dollar while ARGENT 48s were higher, trading in the mid 42s.
RUSSIA
The Russian economy expanded 2.3% in Q4 and 1.4% in 2019 according to a report by the Economy Ministry. While the figure is some way below the 2.5% growth in 2018, it was slightly above the 1.3% projection by the ministry. Retail sales and real wage growth however underperformed. December sales grew 1.9% YoY, some way below a 2.7% forecast and 2.3% recorded a year earlier, while November wage growth came in at 2.7%, below a 4.0% forecast and 3.8% in November 2018. The ruble closed firmer 62.2781 to the dollar while RUSSIA 47s were about flat, trading in the mid 127s.
SSA
Moody’s has held off weighing in on South Africa’s progress towards reforms after downgrading outlook to negative in November. Lucie Villa, the lead sovereign analyst for South Africa noted that there weren’t any real flags as economic growth data was “not pointing to a positive or particularly negative direction.” Moody’s remains the only major credit ratings agency that has South African sovereign debt with an investment grade rating and is due to review its rating on March 27. The rand closed firmer at 14.5506 to the dollar while SOAF 49s were over a point higher, trading in the low 98s.