Global markets gave back gains overnight in another sharp sell-off. US stocks tumbled as volatility sparked by the spread of the coronavirus woes continued to grip financial markets. The S&P 500 fell more than 3%, as wild swings pile up. The market index measure has notched three 4% moves since its February record and two other 3% drops in the most volatile stretch since 2011.
More cases of the virus were reported across the US, including in New York while California declared a state of emergency. The World Health Organisation reported a sharp increase in cases in Europe's largest economies and an industry association warned the outbreak could cost airlines as much as $113bn in lost revenue.
Interestingly, surging Chinese stocks have now erased the last of their declines triggered by the outbreak, as the growth in new cases seems to have peaked and China seems to be returning to normal business. Once again, volatility is not expected to abate any time soon, and we think the turning point will come as growth in the number of new cases outside of China peaks. While we do not see a sustained sell-off, we think it is too early to be broadly buying in this market.
Stock in Focus: Myer (MYR:ASX)
Department store giant Myer has reported a 37% drop in first half profit, weighed down by restructuring costs, redundancies and the exit of Apple products and Country Road Group brands.
The company has also warned the tough times will continue into the second half of the year as the coronavirus outbreak exacerbates the pain of an already soft consumer environment. This was clearly not a good update and derails Myer's turnaround plans.
We currently have a HOLD rating on Myer
Members should look out for a full update on Myer to be released in our weekly report.
Australia & New Zealand Market Movers
The Australian market experienced its best day in 2-months on Thursday (ASX 200 +1.1%) reversing falls from the previous session. However, travel and tourism companies were among those to fall on Thursday, such as Flight Centre and Corporate Travel Management. TPG Telecom was one of the best performers, rising 9% after the Australian Competition and Consumer Commission said it would not appeal the Federal Court's decision permitting the company's merger with Vodafone. TPG also lifted its full-year earnings guidance by $35 million on the back of softer NBN headwinds.
The NZ market rallied yesterday (NZX50 up +2%) as investors shook off some of their recent concerns about the covid-19 outbreak, taking heart from the prospect of a more mainstream US democratic presidential contender in Joe Biden. Retirement stock rallied hard as a sector which has been hit hard of late.
3 Things Markets Will be Watching this Week
- Coronavirus news flow will continue to dominate investors’ attention in the week ahead.
- The Reserve Bank of Australia meets on Tuesday amidst increasing expectations they will take the opportunity to cut rates.
- Closely watched US economic data is released at the end of the week.
Have a Great Day,