(A look at the day ahead from EMEA markets editor Mike Dolan. The views expressed are his own.)
By Mike Dolan
LONDON, Feb 6 (Reuters) - World markets accelerated higher again on Thursday following record closes on Wall St overnight as investors attempted to see beyond what they expect to be a temporary economic hit from the coronavirus outbreak and focussed instead on the additional stimulus that governments and central banks are prepared to deliver to a global economy which had clearly been picking up steam prior to the health scare. The bounceback went up a gear early on Wednesday amid sketchy reports of progress in finding a vaccine, but even though there’s no concrete sign of a breakthrough on that front the market’s sensitivity to any positive information showed an eagerness for investors to hit the re-set button well ahead of a widely expected peaking of the contagion over the next month or two. Following a monetary easing at the weekend and public committments to ease further and ramp up government spending, China’s government on Thursday said it would halve additional tariffs levied against 1,717 U.S. goods last year following the signing of a ‘Phase One’ trade deal with Washington – a sign it was both keen to honour the truce while easing the burden on its own virus-hit economy. Shanghai stocks, which have now regained about half the losses suffered since the virus hit hard just before the lunar new year holiday, jumped almost 2% on Thursday. Tokyo, Hong Kong and Seoul gained more than 2% each. MSCI’s all-country index, which is having its best week since June, has now recovered more than three quarters of its losses since the virus outbreak and is just 0.5% from revisiting its all-time high.
That all followed a storming session on Wall St on Wednesday that catapulted its main equity indices back to record highs on a mix of eye-catching economic news and the acquittal of President Donald Trump in his impeachment trial in the Senate. ADP’s private sector jobs data for January showed a jump of 291,000 payrolls during the month – almost twice expectations – and service sector business surveys also came in well above forecasts. Economic surprise indices for the G10 developed countries and emerging markets are now stalking their most positive levels in almost two years – albeit still largely reflecting raw data reports that pre-date the virus outbreak. Ten-year U.S. Treasury yields jumped back to their highest since January 24, with the yield curve between 3 months and 10 years steepening again back into positive territory. Wall St’s ViX volatility gauge fell back as low as 15%, dipping below its 200-day moving average overnight. Japan’s ‘safe-haven’ yen continued its retreat and dollar/yen came within a whisker of 110 earlier. Both gold and oil prices were firmer first thing. Euro/dollar also edged up after steep losses on Wednesday, even though German industrial orders numbers for December disappointed yet again. European Central Bank chief Lagarde testifies to the European Parliament on Thursday. Europeaan stocks rose about 0.6% at the open, with U.S. stock futures still rising too.
On the European corporate news front, it's a heavy day for bank earnings that show how the sector is coping with negative rates. Numbers from Italy's No.1 bank UniCredit, Nordic leader Nordea and Austria's Raiffeisen are looking good so far and come as analysts have started to edge up their forecasts on the sector's profits following nearly two years of downgrades, although Societe Generale and ING Groep fell short of analyst expectations. Despite the Q4 miss, SocGen shares rose 2% at the open, supported by a pledge to boost shareholder returns. Unicredit stock rose 4%. There were also decent numbers in the energy sector from oil majors. Total rose 2% after Q4 net adjusted profit steadied at $3.2 billion, beating expectations, while Equinor rose 1% after a smaller-than-expected drop in Q4 core operating profits. The trade-sensitive car sector, the worst performer in Europe so far in 2020, could be underpinned by the China tariff news, while Toyota raised its full-year profit forecast on better-than-expected vehicle sales could also be sector positive and its stock rose 2.5% in Tokyo even though Japan's No. 1 carmaker said the impact of the new coronavirus was difficult to gauge. Meanwhile, cost cuts and sales growth helped unlisted Volvo Car post an 18% rise in Q4 operating profit and its stock was up 1%. In tech, U.S. chip maker Qualcomm said overnight coronavirus poses a potential threat to the mobile phone industry, overshadowing results that otherwise beat expectations. A surprise net profit pushed shares in telecom network equipment maker Nokia up 5%.
* Europe corp events: Unicredit, SocGen, Natixis, Nordea, Banco BPM, ING. L’Oreal, Mediobanca, Total, ArcelorMittal, Fiat Chrysler, Ashmore, Raiffeisen, Sampo, Osram Licht, Publicis, Dassault, DNB, Sanofi, Swisscom, Nokia, Equinor, OMV. Trading statements from Tate&Lyle, Royal Mail, Compass
* Germany Dec industrial orders
* Spain sells government bonds
* European Central Bank chief Lagarde testifies to European Parliament committee; ECB’s Vice President de Guindos speaks in Madrid
* Sweden Jan house prices
* Czech Dec trade and industry output
* Russia Jan inflation
* US Q4 earnings: Twitter, News Corp, Bristol Myers Squibb, Phillip Morris, S&P Global, Estee Lauder, Wills Towers Watson, Yum!, Tyson Foods, Kellogg etc
* US Q4 labour costs, weekly jobless claims
* Dallas Fed chief Kaplan speaks in Dallas (Reporting by Mike Dolan; Editing by Gareth Jones)