Global equity markets remain gripped by uncertainty today as investors await the next major development in the Covid-19 outbreak.
Yesterday was another brutal session with the Dow shedding 900 points, the SPX dropping almost 100 points, to record its worst two-day performance since August 2015, and the Nasdaq down 244 points. Trading volumes on Wall Street were the highest since the 2018 December sell-off.
After pushing higher again on the open, European markets have slumped deep into negative territory. The Euro Stoxx 50 dropped nearly 3% to trade below 3,470, the DAX plunged below 12,400 and the FTSE 100 hit a fresh one-year low below 6,880. US futures which, like yesterday, had indicated a positive open, quickly erased gains.
US braces for virus, companies warn of profit hit
The US Centres for Disease Control and Prevention (CDC) spooked investors after warning American citizens to prepare for a domestic outbreak of the virus. Reuters reports a top CDC official stating that it is no longer a case of ‘if’ Covid-19 becomes a global pandemic, but ‘when’.
Market sentiment has also been hit as a slew of profit warnings from companies begin to reveal the kind of impact the coronavirus outbreak has already had. Drinks maker Diageo expects Covid-19 to knock £200 million off operating profits, Danone stated that it is likely to take a €100 million hit in the current quarter, while travel catering firm SSP has forecast a 50% drop in Asia-Pacific sales. Elsewhere, Lufthansa has announced a hiring freeze and is hoping to cut costs by offering employees unpaid leave.
Stock in travel and leisure companies is being hammered – EasyJet has tumbled 22% so far this week, while TUI is down around 14% on the LSE, and Carnival – whose cruise ships have been at the centre of several quarantines – is off 10% this week.
Meanwhile, crude oil prices have hit their lowest levels since January 2019 thanks to a 1.5% slump. Crude dropped to test $49.00, while Brent fell over 1.3% to trend just above the more-than one-year low hit of $53.09 hit earlier this February.
Gold and silver were both up around 1%, although gold remains far below Monday’s seven-year high of $1,689.27.
Markets await next big virus outbreak
Investors continue to monitor the news flow carefully for signs of a further uptick in case numbers. The number of cases in South Korea has leapt again, with 169 having been reported in the morning during the Asian session and another 115 in the afternoon. Hotels in Tenerife and Austria are under quarantine after guests or staff tested positive for the virus. Two cases have been reported in Germany and the number of cases in Madrid has risen to eight.
Markets may be a little indecisive at the moment, but could gain more direction when US markets open later. Yesterday saw the same pattern – a wobbly Europe quickly committed to a sell-off once it was clear that US stocks were only heading lower.