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Stocks in China Slide; U.S. Equity Futures Advance

Tuesday 4th February 2020

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U.S. stocks rebounded from the worst week in six months as investors speculated efforts to contain the coronavirus will minimize lasting damage to the global economy. Commodities remained under pressure, with copper headed for a 14th straight loss and oil plunging more than 2%.

The S&P 500 Index advanced as China added stimulus in an effort to shore up its economy and American manufacturing data topped estimates. It’s still down more than 2% since the virus scare started almost two weeks ago. Equities wobbled midday Monday after U.S. health authorities said they were preparing as if the disease that originated in China would become a pandemic. Tesla Inc. surged as much as 20%.

The risk-on mood in U.S. equities didn’t spread across assets. Treasuries pared most of their losses and oil slumped below $51 a barrel. Copper futures dropped again in London. Stocks in Shanghai -- which hadn’t traded since holidays began Jan. 23 -- tumbled the most since 2015 as the nation’s economy remained virtually shut down because of the virus.

“In the short-term, equity markets are at risk and we haven’t seen yet the types of declines that we saw during SARS,” Ed Campbell, portfolio manager and managing director at QMA, said in a phone interview. “The lesson from history is that risk assets don’t bottom until the net number of new cases peaks and it’s not clear that we’ve reached that point.”

The spread of the cornoavirus kept investors on edge Monday after American equities had the worst week since August on concern economic growth will falter as the virus spreads. The People’s Bank of China cut rates as it injected cash into the financial system on Monday, part of a slew of measures to shore up their financial markets. Still, the economic toll is becoming clearer, with Beijing reportedly evaluating whether its growth target this year should be softened. A manufacturing reading in the U.S. topped estimates.

(Bloomberg)



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