AS EXPECTED, Donald Trump is still the president of the United States and this is what the markets were expecting as most of the members of the senate were republicans.
However, the novel coronavirus continues to affect negatively not only the global outlook but also future performance of companies.
Wire reports stated China raised the death toll from the coronavirus epidemic to 811 on Sunday, passing the number killed globally by the SARS epidemic in 2002/2003 and raising anxiety among people preparing to return to work after an extended Chinese New Year break.
As for corporations including Facebook, it expects the coronavirus will impact the production of its Oculus virtual reality headsets, which are produced in China.
Some people might say this is an excuse for the bad expectations, but according to Mark Zuckerberg, “On Christmas day, people bought almost US$5mil worth of content in the Oculus Store. That’s an outlier day, but still this is real volume by any measure and it shows the progress this ecosystem is making.”
In this context, it should not be a surprise that at the end of January many investors began selling off stocks.
When the Chinese stock markets reopened after an extended Lunar New Year break, its benchmark index fell 8%.
One of the main targets of short sellers were travel companies, luxury good producers and of course oil industries.
As a result, the world’s largest oil producers met to discuss cutting output in order to support falling prices. Of course, America was not invited.
It is also important to keep in mind that with a production rate of 15.3 million barrels per day, the US is currently the top oil producer in the Americas.
The North American nation has proven oil reserves of 61,200 million barrels. Thus, it could be an opportunity for ExxonMobil, Chevron and ConocoPhillips as these are some of the major oil-producing companies in the US.
On the other hand, the good part of this impact has already been discounted by the markets, meaning that most likely we are not going to see similar falls in the near future unless something terrible happens.
However, we might see some cuts in outlook from companies like Apple, Facebook, Tesla, etc. as their businesses are closely linked to China.
Nevertheless, encouraging economic data once again saved the party.
Last week, stocks recorded another round of solid gains. The Nasdaq Composite Index reached new all-time highs, whilst the S&P 500 Index closed its weekly best performance since June.
The Russell 1000 growth index, in turn, registered a 6% growth in the week, mainly thanks to an increase in Microsoft shares.
Tesla first surged after beating revenue and user growth estimates, but after fell almost 20%.
China has announced it will cut tariffs on some US imports as it moves to implement a “phase one” trade deal with the Trump administration and cushion the economic fallout from the coronavirus epidemic. As a result, the price of gold and government bond prices fell.
Macro summary of the week:
1. Impeachment headache is finally over.
2. Non-farm payrolls rose 225k m/o/m, above the expected 160k.
3. Private payrolls came in at 291k for January, above expectations.
4. Jobless claims fell 15k w/o/w from 217k to 202k.
5. Home refinance apps rose 15.0% w/o/w.
6. Same store sales rose 5.7% w/o/w.
7. Factory orders rose 1.8% m/o/m, above expectations.
8. Total nonfarm employment level (March 2019) revised downward by 514,000;
9. Home mortgage apps decreased 10.0% w/o/w;
10. Unemployment rate rose from 3.5% to 3.6% in January.
11. PMI Manufacturing Index fell 0.5% in January from 52.4 to 51.9.
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