Fears of the consequences that the coronavirus outbreak would have on the Chinese economy and therefore the world economy, have led the main Wall Street indices to record setbacks of more than 1.5% on Monday. Dow Jones falls 1.57% compared to Friday, to 28,535.80 points; the S&P 500 drops 1.57%, down to 3,243.63 integers, and the Nasdaq 100 loses 2%, to 8,952.18 units.
These setbacks come after the Chinese authorities warned that the spread of the coronavirus, which has already caused 80 deaths and more than 2,700 infected in the country, could accelerate. Moreover, they point out that the disease is contagious even before showing symptoms, which could make control work difficult to prevent the spread. In the United States, there are already five confirmed cases.
“The bearish gaps, together with the loss of the guideline that had been guiding the rises since last October, suggest that the rally has concluded, something that would definitely be confirmed if the minimums of the first sessions of the year are lost, “says Joan Cabrero, director of strategy for Ecotrader.
“However, a correction must be seen as something quite normal within the strong trend that Wall Street develops. It will probably be a temporary pause, so as soon as we detect signs of seller exhaustion we will look for entrance windows relying on the resumption of its trend in absolute free rise, “emphasizes the expert.
Therefore, “everything indicates that we have seen a temporary ceiling in the climbs and we could see a greater adjustment towards the area of the 3,170-3,155 points. Until then we would not be in favor of buying US equity again. “The distance that still separates Standar & Poor's from the level indicated by Cabrero is approximately 2.5%.
Among the companies listed on the S&P 500, the ones that have collapsed the most have been those related to tourism, such as Wynn Resorts, which lost about 8%, and Royal Caribbean, around 7%, as well as Las Vegas Sands, owner of resorts in the Chinese city of Macao. American Airlines shares sank almost 6%, as has happened to other airlines.
Since Citi Research foresee that the number of cases declared [of coronavirus] will continue on the rise no further than March 10, which will be 21 days after the end of the holiday period. “Once infected, a patient with the Wuhan coronavirus could show symptoms with a delay of up to 21 days, according to the Hong Kong Hospital Authority,” they cite from the US bank.
The date of March 10 would be three months and 23 days after the diagnosis of the first case. It would be similar to what happened with the 2003 SARS epidemic. In Citi they add that the Hang Seng and MSCI China indices bottomed out a month and a half after the peak of registered SARS cases in 2003, so they point out that if it happened the same with Wuhan’s coronavirus, the indices would mark minimum around April 25 before resuming the climbs. However, experts believe that on this occasion stock indices will fall less than with the 2003 epidemic.
Oil already accumulates a fall of 9.5%
Oil futures Brent descend to the zone of $ 59.1 per barrel after another 2.5% drop compared to Friday. The reference crude in Europe has lost around 9.5% of its value since last January 20, after falling back in the last five sessions. In this way, the Brent returns to October 2019 levels and accumulates losses of 10.4% so far this year.
Along the same lines, the futures of the West texas, which slide to the level of the $ 52.9 per barrel after falling 2.2% during the day. They also lost around 9.5% in the last five sessions, since January 17, and recorded losses of 13% in 2020.
The fear that the consequences of the coronavirus outbreak have a remarkable impact on the Chinese economy, and therefore in energy consumption, they have unleashed oil sales, despite the efforts of OPEC and its allies to boost prices.
In addition, the Chinese Government has extended the holiday period for the Lunar New Year for two days, until February 2. Usually the natural resource imports they descend during the holidays of the Chinese New Year, which would be aggravated if they continue over.
Gold is again a refuge and marks a new maximum
The precious metal reaches the level of the $ 1,580 per ounce towards the close of the session, after picking up around 0.5% compared to Friday, in which it is its third consecutive day on the rise. Thus, gold registers a new annual maximum and reaches a level that not seen at closing since 2012. So far this year, earns almost 4%.
On the other hand, currencies remain flat. The euro remains above 1.10 dollars, specifically, it remains in the zone of 1.102 dollars, after retreating but with hardly any changes with the previous session. So far this year, 1.7% depreciates against the US banknote.
As for the pound sterling, four days before the United Kingdom legally ceases to belong to the European Union, the British currency remains close to annual highs, at the level of 1,185 euros, and it is appreciated around a slight 0.2 % in so far this year.
The biggest buyers of the metal are Chinese consumers, who use it as a gift to mark the beginning of the New Year, according to Bloomberg. However, given the circumstances, this year also serves as a refuge from declines in equities, bonds and raw materials.
Boeing falls weigh
As for the values, the actions of Boeing they fall hard after an accident registered in the eastern part of Afghanistan. The setbacks of this component are very important, since it is the one that has more weight of the Dow Jones.
On the agenda of the day, US investors have the sale of new homes, which has given a major surprise. Experts expected an advance in December of 1.5% and the data has reflected a decline of 0.4%, to 694,000 units.
However, the main course will arrive on Wednesday with the meeting of the Federal Reserve, although changes in interest rates are not expected.