Market Overview

18 February 2020

Fall in Asian Stocks Puts Pressure on Other Markets Today

The decline in Asian stocks forced Wall Street indexes to retreat from record highs. The US market was closed on Monday since the United States celebrated the President's Day related to George Washington's birthday, but the American stock indexes futures yesterday traded higher on world markets because of the clearly positive Asian dynamics. The dispositions changed dramatically on Tuesday to a negative picture, straight from the early hours of the day.

The revenue warning from Apple Co that it won't meet its quarterly target in March due to the coronavirus, was the main reason for anxiety today. Apple is dominating news headlines today and its shares dropped almost six % in Frankfurt. Although the number of new coronavirus cases in mainland China fell below 2,000 for the first time since January, the death toll in China has climbed to 1,868, the National Health Commission said, and the outbreak remains far from being contained. This is why Apple issued a warning that its recovery could be delayed.

How serious could the consequences really be? Mehdi Hosseini, a senior analyst at Philadelphia-based Susquehanna Financial Group, commented for Bloomberg TV by saying: "This is not entirely surprising, everybody was expecting some of the disruptions in the supply chains. But, the number one question is what happens with the demand. If there is a demand disruption that is gonna sustain for one or two quarters, we could see a more broad-based slowdown." And, of course, this is not just about Apple, but many other companies are alarmed over how soon Chinese consumers will be able to return to a more active life. If China's consumption of semiconductors lessens, it could also impact suppliers in Taiwan and South Korea.

However, the Japanese Nikkey 225 index fell most noticeably, it has lost almost 2.5% since the beginning of the week. However, the Japanese market drop was spurred by the sharp -6.3% year-on-year Gross Domestic Product (GDP) decrease in Japan. There is a clear understanding that the virus is unlikely to be responsible for this GDP decline, it just hasn't had enough time to produce such a devastating effect on January's data. Moreover, the weakest components of Japan's GDP report were the private consumption (-2.9%) and the capital expenditure (-3.7%), while the strongest component was the external demand (+0.5%). The Japanese Yen may suffer even more in case of a further decline on global stock markets. Safe-haven buying of Japanese Yen could be limited if this is the case, while the hedge fund managers would pay more attention to the US Dollar and gold contracts.

The Chinese stock market performed well today compared to the Japanese stocks. The Shanghai Shenzhen index (CSI300) lost 0.49% only today after it gained +2.25% before on Monday. The Hang Seng index (HK50) of Hong Kong fell -1.32% on Tuesday after +1.04 result yesterday. The Shanghai Composite index (SSEC) fell just -0.43% today, compared to Monday's close, but regained to a small positive level of +0.05% performance by the close of today's trading in China. It is important to observe that all these Chinese indexes have outperformed the levels at which they were before the Lunar New Year holidays on January 23 when the massive hysteria around the coronavirus hadn't started yet. Certainly, the People's Bank of China with everyday liquidity interventions, adrenalised Chinese stock markets enormously. Still, the whole technical picture indicates a certain stability, or even a market immunity to the outbreak.

Nevertheless, all financial instruments, without exception, are expected to consider further fluctuations of Asian markets. The most sensitive reactions may be expected by the global S&P500, Nasdaq and Dow Jones indexes on the intraday base until the end of the week. The pan-eurozone Euro Stoxx 50 initially dropped -0.7% on today's market opening, but then recovered a half of its loss. The same story is repeated with the French CAC 40 and the German Xetra DAX. The European markets were hit by the weak HSBC group report but still it looks like Europe has not yet succumbed to any kind of panic. Yet, main events are expected to unfold after the US stock market opening.


Disclaimer:

Analysis and opinions provided herein are intended solely for informational and educational purposes and don't represent a recommendation or investment advice by TeleTrade.

Indiscriminate reliance on illustrative or informational materials may lead to losses.

Open Forex Demo Account
I understand and accept the Privacy Policy and agree that my name and contact details can be used by TeleTrade to contact me about the information I have selected.
23 International Awards
Have a question?

We are ready to assist you in every step of your trading experience
by providing 24/5 multilingual customer support.

Follow us

Risk Warning: Trading Forex and CFDs on margin carries a high level of risk and may not be suitable for all investors. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Prior to trading, you should take into consideration your level of experience and financial situation. TeleTrade strives to provide you with all the necessary information and protective measures, but, if the risks seem still unclear to you, please seek independent advice.

© 2011-2020 TeleTrade-DJ International Consulting Ltd

TeleTrade-DJ International Consulting Ltd is registered as a Cyprus Investment Firm (CIF) under registration number HE272810 and is licensed by the Cyprus Securities and Exchange Commission (CySEC) under license number 158/11.

The company operates in accordance with Markets in Financial Instruments Directive (MiFID).

The content on this website is for information purposes only. All the services and information provided have been obtained from sources deemed to be reliable. TeleTrade-DJ International Consulting Ltd ("TeleTrade") and/or any third-party information providers provide the services and information without warranty of any kind. By using this information and services you agree that under no circumstances shall TeleTrade have any liability to any person or entity for any loss or damage in whole or part caused by reliance on such information and services.

TeleTrade cooperates exclusively with regulated financial institutions for the safekeeping of clients' funds. Please see the entire list of banks and payment service providers entrusted with the handling of clients' funds.

Please read our full Terms of Use.

To maximise our visitors' browsing experience, TeleTrade uses cookies in our web services. By continuing to browse this site you agree to our use of cookies. You may change your cookie consent or view our cookie declaration here.

TeleTrade-DJ International Consulting Ltd currently provides its services on a cross-border basis, within EEA states (except Belgium) under the MiFID passporting regime, and in selected 3rd countries. TeleTrade does not provide its services to residents or nationals of the USA.

Material posted here is solely for information purposes and reliance on this may lead to losses. Past performances are not a reliable indicator of future results. Please read our full disclaimer.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.