The second stock market ‘scare’ of the year slows down Wall Street rises due to the ‘Chinese virus’ epidemic risk

Wall street reopens its posts after this Monday's holiday with an eye on the words and gestures of the leaders gathered at the Davos Forum and the other in China, where more cases of the coronavirus have been detected on the eve of the holidays for the Chinese New Year. The luxury sector and the airline sector were the most affected during the session. The Dow Jones falls 0.52%, to 29,196.04 points (it exceeded 29,300 on Friday) and the S&P 500 yields 0.27%, down to 3,320.79 points. For its part, the technology of the Nasdaq 100 falls just 0.08, to stand at 9,166.63 units.

North American equities follow the bearish course that Europe's squares mark today. But where sales have really started, it has been in the Asian stock exchanges this morning, especially the Chinese ones (the Shanghai Stock Exchange has lost 1.4%).

The reasons are two: first, the downgrade of Hong Kong's debt rating by the Moody's agency (the Hang Seng index closed today with a 2.8% drop); and secondly by the pandemic risk for a new coronavirus in Asia. In fact, a case of contagion in the United States has been confirmed this afternoon in a passenger who landed in Seattle from China.

The risk of the virus spreading throughout the world has made companies as diverse as Christian Dior, Kering, Louis Vuitton, IAG, American Airlines, Air France-KLM or Las Vegas Sands They are deployed in the stock market at a time.

Financial analysts say that the deaths and the absence of improvements to prevent its spread is what is causing nervousness in Asian markets, a few days after the start of the Lunar New Year holidays. Hundreds of millions of Chinese travel each year around these dates, many of them abroad, where they buy luxury products.

The second scare of the year, after the warlike tension of a few days ago in Iraq, fear spread throughout the financial markets around the world. In Europe, there is no index that got rid yesterday of the falls (among them the Spanish Ibex 35), while the main stock market indicators of Wall Street recorded setbacks and Asian stock exchanges entered negative territory after investors associated the new outbreak with the spread of severe acute respiratory syndrome (SARS) of 2002/2003, another type of coronavirus that emerged in China and became a worldwide pandemic, which claimed Almost 800 fatalities.

Airlines lose height

Tourism, luxury and airlines were the sectors most affected by the virus that is spreading rapidly in China. In Spain, IAG fell more than 3% to 7.46 euros per share, while Lufthansa left 2.4% and Air France- KLM Y Turkish Airlines fell by 2%. Firms such as Kering and Dior (2%), and LVMH and L'Oréal (1% and 1.3%, respectively) collapsed with equal force.

The Asian country is one of the largest luxury markets on the planet, with more than 100 millionaires among the 10% of the world's richest population. Some firms such as UBS highlight China as the country with the richest in the world, above the United States.

In China, the actions of the hotel chain BTG more than 5% have collapsed on Tuesday and another 9% on Monday, and the titles of the China Eastern Airlines They fell 3%.

On the contrary, pharmaceutical companies are they rubbed their hands, with increases of 5.5% in the case of Guizhou Yibai Pharmaceutical.

On Wall Street, some of the biggest stock market falls have come from Wynn Resorts (6%), Las Vegas Sands and MGM Resorts (5%), Boeing, United Airlines, Royal Caribbean and Marriott International, which lost around 4 %.

Absolute Free Upload

Despite the downs today, there is nothing to worry about in the New York Stock Exchange. “An absolute free ascent is the most bullish technical situation that exists and Wall Street has been in it since the beginning of last November,” explains Joan Cabrero, director of Strategy for Ecotrader.

“Neither the short-term overbought nor the vertical rise in recent weeks is intimidating bulls who continue to maintain full control of the situation,” insists the expert.

And how to know when the 'party' will end? According to Cabrero, there will be “no sign of buyer exhaustion as long as the S&P does not close a week below the lows of the previous week, something that has not happened since the beginning of last October.”

“The last weekly minimums have been established by the S&P 500 in 3,265 points“, notes the technical analyst.

'Brent' oil loses $ 65 again

The reference crude futures in Europe have fallen by around 1% compared to Monday to stand at $ 64.5 per barrel So far this year, the Brent accumulates losses of 2.3% of its value.

In the futures of West texas a somewhat smaller decrease of 0.3% has been observed with respect to the previous day, which has taken US crude to the area of $ 58.3 per barrel It loses about 4.4% of its value in the first days of January.

In addition to the fear in the markets of the consequences that an eventual spread of the coronavirus may have, oil production forecasts in the United States have been advanced, which will be formalized on Wednesday.

It is estimated that the production of the seven largest shale producers (shale) will increase by 22,000 barrels per day in February, up to 9.2 million barrels per day, according to a report by the Energy Information Agency (EIA). In addition, the production of the Permian Basin (a region that includes part of Texas and New Mexico) is expected to grow in 45,000 barrels per day in February With respect to January.

The euro ends flat in its crossing with the dollar

While the euro has touched $ 1,112 during the day, at the close of the session on Wall Street it was closer to $ 1,109, with hardly any changes from Monday. So far this year, the European currency depreciates around 1.1% against the US banknote.

For its part, the pound sterling rebounds a slight 0.3% compared to the previous day, to reach the level of 1,176 euros and leaves its annual losses against the euro at 0.5%.

As for metals, gold yields 0.2%, to fall to the level of $ 1,557.2 per ounce and revalue 2.2% in 2020.

“Gold is a place you want to be,” said economist David Rosenberg of Rosenberg Research and Associates and former economist at Merrill Lynch before the subprime crisis. In statements collected by Bloomberg, he emphasizes that gold “is inversely correlated with interest rates,” which makes it attractive as an investment, but “it is also insurance when things go wrong.”

Rosenberg believes that an economic slowdown is on its way in the United States despite lasting employment growth, distension in relations between the United States and China and the historic highs that have reached the exchanges in North America.

“If things are so fantastic, why did the Federal Reserve have to cut rates last year?” The expert reflected.

New batch of results

The references that can change the trend of Wall Street in the short term are, without a doubt, the results of listed companies. Without going any further, today they are accountable after the close of the session IBM Y Netflix. Halliburton and United Airlines have done it before.

Netflix posted a net profit of 587 million dollars in the fourth quarter of 2019, up 338% when compared to the 134 million dollars registered during the same period last year, reports José Luis de Haro from New York.

Analysts believe that the “strong growth” of subscriptions “is crucial” so that Netflix titles do not lag behind those of other big tech companies, says Haris Anwar, an analyst at Investing.com.

Trump in Davos

Likewise, the investment community will have its eyes directed to the Swiss city of Davos, a place that once popularized The Magic Mountain Thomas Mann and where, as is tradition, the World Economic Forum is held in which this year the President of the United States, Donald Trump, participates and which Spanish President Pedro Sánchez will also attend.

In his appearance, the president has boasted of his economic achievements since he arrived at the White House. Among other things, he has assured that the US trade relationship with China, a country with which a trade war began more than a year ago, “has never been better.”

For readers who want more: Ecotrader, the investment strategy portal of elEconomista.es