News & Analysis

Weekly Summary: Mistrust Over Virus Case Count

February 21, 2020

By Deepta Bolaky
 @DeeptaGOMarkets

Weekly Summary

Markets swung from risk-on to risk-off mode throughout the week and were primarily driven by the developments around the coronavirus. The virus has added another layer of uncertainty and investors are struggling to assess the extent of the economic disruptions due to a lack of transparency around the virus.

Japanese Economy

New data this week has shown that Japan’s economy is weaker than expected. The preliminary figures revived recession fears as annual figures disappoint with a contraction figure of 6.3% while the Q4 shows a contraction of 1.6%. Investors are concerned about the sharpest contraction in years and that the economy is poised for more headwinds for this quarter due to the coronavirus pandemic.

In Asia, the ramping efforts from China to contain the virus and stimulate its financial system which helped Chinese stocks to recover strongly compared to its peers.


Source: Bloomberg Terminal 

Stock Market – New Highs

Trading in the stock market was volatile this week:

  • Corporate results were generally buoyant but companies within certain industries have either issued warnings or downgraded forecasts due to the coronavirus epidemic.
  • Another change in the counting methodology fuelled doubts over the reliability of the virus data in China. The government has changed the methodology twice in a month making it hard to assess whether the new cases are showing signs of abating.
  • US markets drove to new highs bolstered by earnings and the strength in its economy. Economic indicators are showing a more resilient US economy compared to its peers.

As of writing, the global equity markets were in a sea of red as the renewed concerns over transparency on reporting new virus cases weighed on risk sentiment.


Source: Bloomberg Terminal

Australia 

It was a busy week for the Australian markets with the busiest period on the earnings front and key events on the economic calendar. Corporate earnings were the main driver of big moves in the Australian share market.

Marginal gains across almost all sectors helped the Australian equity benchmarks offsetting the heavy losses in the tech sector. Wisetech Global erased more than 30% of its share price this week and is currently trading at $19.92.

After last year’s reports alleging that the company was manipulating its accounts, the downgrade of its full-year forecast from a range between $440 million and $460 million to $420 million and $450 million spooked investors.


Source: Bloomberg Terminal

On the economic front, the RBA minutes at the beginning of the week set a negative tone for the Australian dollar. Better-than-expected wage growth and mixed employment reports did little to help the Aussie dollar.

The AUDUSD pair struggled to bounce back from the 0.66 level. Amid a lack of support from the fundamental side, any short-term correction will likely be dependent on the developments on the COVID19.


Source: GO MT5

Monday, 24 February 2020 
Indicative Index Dividends
Dividends are in Points
ASX200WS30US500US2000NDX100CAC40STOXX50
8.5266.4430.4170.0190.05400
ESP35ITA40FTSE100DAX30HK50JP225INDIA50
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