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Top 5 Things to Know in the Market on Tuesday, 21st January

By Geoffrey Smith

Investing.com -- Global stocks are falling amid concerns about a possible rerun of the SARS epidemic after more worrying news out of China. The trial of Donald Trump in the Senate gets under way, hours after the President and environmentalist Greta Thunberg square off in Davos. There's brighter economic data out of Europe that put a dint in hopes for a U.K. rate cut, while Netflix (NASDAQ:NFLX) will make waves after the close with its latest earnings report. Investors will be hoping for a better set of numbers than the ones they got from Swiss banking giant UBS earlier. Here's what you need to know in financial markets on Tuesday, 21st January.

1. Impeachment trial stars in U.S. Senate

The trial of President Donald Trump in the Senate starts in earnest on Tuesday amid heated controversy about the rules laid out by the majority Republican Party.

Procedural rules set out by Senate Majority Leader Mitch McConnell restrict the time allowed to set out the case against Trump and make it all but certain that no witnesses will be called to give evidence, while also raising the bar for admitting evidence already provided by the House of Representatives’ impeachment proceedings.

The President is accused of abusing his office by withholding military aid for Ukraine approved by Congress, while pressuring Ukrainian President Volodymyr Zelensky to initiate criminal investigations into the son of former Vice-President Joe Biden. Biden is the front-runner for the Democratic nomination in this year’s election campaign.

2. Trump vs. Thunberg in Davos

Trump himself, meanwhile, is thousands of miles away at the World Economic Forum, the gab-fest of choice for the world’s business elite.

Trump's speech was a characteristically hyperbolic recital of his own administration's achievements ("an economic boom the like of which has never been seen before"), with some notable swipes at the Federal Reserve ("They raised rates too fast, and they cut them too slowly") and - although he didn't mention her by name, the teenage environmental activist Greta Thunberg, who had addressed the forum just before him.

Thunberg criticized her audience for having done nothing of substance to address Climate Change despite years of lip-service. Trump described climate activists as the successors to medieval prophets of doom, calling them closet Socialists who desire nothing more than personal power.

Environmental issues are enjoying a prominent place in this year’s WEF agenda, after a 2019 that was the hottest year on record for the world’s oceans and the second-hottest year for global average temperatures, as well as being marked by a host of extreme weather events such as the typhoons that hit Japan, and wildfires in Australia, Russia, the U.S. and Brazil.

3. Stocks hit by Asian epidemic fears

A wave of risk aversion hit global stock markets as the spread of a pneumonia-like virus across China triggered concerns about Chinese growth, while a Moody’s downgrade of Hong Kong’s credit rating also continued to weigh on sentiment.

The so-called coronavirus has now claimed four lives, with hundreds more confirmed cases across the country, raising fears of a rerun of the SARS epidemic nearly 20 years ago. Authorities have confirmed that the disease can be transmitted from person-to-person.

By 6:30 AM ET (1130 GMT), Dow futures were down 78 points, or 0.3%, while S&P 500 Futures were down 0.4% and Nasdaq 100 futures were down 0.5%.

Earlier, Chinese stock indices had fallen by between 1.4% and 2.0%, while the Euro Stoxx 50 fell 0.8% and the U.K. FTSE 100 fell 1.2%.

4. Brighter data out of Europe hit U.K. rate cut chances

The case for an interest rate cut in the U.K. received a blow from stronger-than-expected labor market data. The Office for National Statistics reported a 208,000 rise in employment in the three months through November, almost twice the consensus estimate.

Sterling rose as much as 0.3% on the news but failed to break out of the downward trend it’s been in since the initial euphoria at Boris Johnson’s election victory started to fade in mid-December.

There was also brighter news from Germany, where the ZEW survey of investor sentiment hit its highest level in over four years in January. That follows a report from Germany’s Bundesbank on Monday which suggested that the key manufacturing sector could bottom out early this year.

The euro rose above $1.1100 for the first time since Friday in response.

5. Netflix's earnings in spotlight after UBS disappointment

Netflix will report its figures for the three months through December after the close, an update that will show what shape the company is in as the streaming wars kick off in earnest this year.

Analysts polled by Investing.com predict earnings per share of 52 cents on revenue of $5.45 billion.

Also, IBM will release its latest quarterly results, hoping for a return to break a years-long trend of declining revenue.

Earlier, Swiss banking giant UBS Group (NYSE:UBS) missed estimates with its fourth-quarter and 2019 results, setting itself a lower set of medium-term targets against a backdrop of persistent low interest rates.

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