News & Analysis

Weekly Summary: Global Growth Uncertainties – The Balance of Risks

February 14, 2020

By Deepta Bolaky
 @DeeptaGOMarkets

Weekly Summary

Global growth concerns were the primary driver of risk sentiment in the financial markets. Investors were busy analysing economic indicators, earnings results and monitoring the impact of the coronavirus on the global economy. 

COVID-19

The increasing efforts globally to prevent the virus from being a global pandemic have reassured investors that the economic effects of the virus will be short-lived. Just a day after it was reported that daily new cases were dropping, China revised the counting methodology to include “clinically diagnosed” cases which caused panic in the markets:

  • 14,840 new cases: 13,332 from the new category
  • 242 new deaths: 135 are from the new category


Source: World Meter 

Stock Market – New Highs

Wall Street reached new highs earlier this week despite fears of the coronavirus outbreak. However, the inclusion of the CT scan-diagnosed patients is casting doubts on whether the epidemic is under control.

Transparency in reporting will be key in driving risk sentiment over the next couple of days and weeks. We expect investors to keep monitoring the rate of infections to analyse whether there are further signs of a slowdown. Any reduction in the daily cases will improve investors’ sentiment.


Source: Bloomberg Terminal

Earnings Season 

In the US, the earnings season is halfway complete. Among all the S&P500 companies that have reported earning, more than 70% have beaten estimates so far. A combination of strong earnings results and fundamentals and a neutral/dovish Fed have driven the stock market to new highs this week.

In Australia, the earnings season is picking up pace in a cautious environment due to the coronavirus fears.  Wednesday and Thursday were the busiest days on the earnings front but were overshadowed by the unexpected lift in the new coronavirus cases due to the change in the methodology.

Earnings reports have been mixed – JB Hi-Fi, Challenger, CBA, Evolution Mining, CSL Limited, Car Sales AGL and Northern Star were among the stocks performing better after the earnings reports while Boral, Suncorp, Blackmores, Telstra, AMP, Newcrest underperformed.

To the exception of the Materials and Energy sector, all the other sectors were trading in positive territory. The financial, utilities and health sector were led by strong gains in stocks like Challenger, CBA, Avita Medical, CSL and AGL following upbeat earnings.


Source: Bloomberg Terminal

The energy sector was in a sea of red as the oil market bore the brunt of global demand growth fears. 

Central Banks Maintain the Status Quo 

Despite a series of speeches across the whole week, central bankers barely moved markets due to their interest in maintaining the status quo in the wake of negative economic fallout for the Chinese economy which could ripple through the global economy in the coming months.

US Economy is Standing Out

Investors are seeking refuge in the US assets as the rest of the world appears to be lagging behind. The Eurozone data this week reiterated a struggling economy while China is facing the risk of a further slowdown due to the outbreak of the virus.

Money is flowing in the US equity markets and the greenback as the current risks are creating a favourable environment for the US assets. The US dollar which tracks the performance of the greenback against a basket of currencies rose above 99 level – the highest level in more than four months.

Monday, 17 February 2020 
Indicative Index Dividends
Dividends are in Points
ASX200WS30US500US2000NDX100CAC40STOXX50
0.158000000
ESP35ITA40FTSE100DAX30HK50JP225INDIA50
0000005.687

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