Dow jumped up 345, advancers over decliners better than 3-1 & NAZ rose an impressive 145. The MLP index was slightly lower to the 203s & the REIT index rose 3+ to the 413s. Junk bond funds crawled higher & Treasuries were sold while stock were purchased. Oil slid lower in the 51s & gold was off 11 to 1576.
AMJ (Alerian MLP Index tracking fund)
US equity markets were higher, shrugging off the nearly 8% plunge in China's Shanghai Composite, which had been closed since Jan 22 for the Lunar New Year holiday. The early gains have the major averages on track to win back some of the big losses that occurred Fri as the number of confirmed cases of coronavirus surged. The coronavirus outbreak has now sickened more than 17K & killed 361, according to the latest figures released by China's National Health Commission. In response to the outbreak, the People's Bank of China announced plans to inject 1.2T Chinese yuan ($173B) into the system to cushion its blow to the economy. Mon was the first day of trading for Chinese markets, which have been closed since Jan 22. West Texas Intermediate crude oil was little changed near $51.60 a barrel & gold was lower by 0.4% at $1582 an ounce. Treasuriss fell, running the yield on the 10-year note up 2.5 basis points to 1.544%. In Europe, Britain's FTSE was trading down 0.9% in its first day of trading following Brexit while Germany's DAX & France's CAC added 0.3% & 0.4%, respectively. Markets across Asia finished mixed despite the Shanghai Composite's plunge. Hong Kong's Hang Seng edged up 0.2% while Japan's Nikkei fell 1% .
British Prime Minister Boris Johnson is setting out a tough opening gambit in negotiations with the EU, saying the UK will walk away without a free-trade deal rather than agree to follow rules set by the 27-nation bloc. Just 60 hours after Britain left the EU, the first country ever to do so, Johnson is digging in his heels about future relations. In a speech to business leaders & intl diplomats in London, Johnson plans to say “we want a free trade agreement,” but not at any cost. “The choice is emphatically not ‘deal or no-deal,’” Johnson plans to say. “The question is whether we agree a trading relationship with the EU comparable to Canada’s – or more like Australia’s.” Australian-style trade would mean a panoply of new tariffs & other barriers between the UK & the EU, its near neighbor & biggest trading partner. In their divorce agreement, Britain & the EU agreed to strike an “ambitious, broad, deep & flexible partnership,” including a free trade deal & agreements for security & other areas. They gave themselves 11 months to do it. A post-Brexit “transition period,” in which relations stay essentially unchanged, runs until the end of 2020. For the rest of this year the UK will continue to follow EU rules, although it will no longer have a say in EU decision-making. Britain says it wants a “Canada-style” free trade agreement with the EU covering both goods & services. But it is adamant it won't agree to follow the EU's entire rule book in return for unfettered trade, because it wants to be free to diverge in order to strike other new deals around the world. The bloc insists there can be no trade deal unless Britain agrees to a “level playing field” & does not undercut EU regulations, especially in areas of environmental protections, worker rights & health and safety standards. Johnson intends to double down on Britain's tough stance. “There is no need for a free trade agreement to involve accepting EU rules on competition policy, subsidies, social protection, the environment, or anything similar, any more than the EU should be obliged to accept U.K. rules,” he will say. “The U.K. will maintain the highest standards in these areas — better, in many respects, than those of the EU -– without the compulsion of a treaty. And it is vital to stress this now.” It’s a message aimed as much at a domestic audience as it is at the bloc, but EU leaders are unlikely to be impressed by what they'll see as British intransigence & wishful thinking.
China's central bank said it will inject 1.2T yuan ($174B) worth of liquidity into the markets via reverse repo operations today as its stock markets prepare to reopen amid an outbreak of a new coronavirus. Chinese authorities have pledged to use various monetary policy tools to ensure liquidity remains reasonably ample & to support firms affected by the virus epidemic, which has so far claimed 305 lives, all but one in China. The People's Bank of China made the announcement yesterday, adding the total liquidity in the banking system will be 900B yuan higher than the same period in 2019 after the injection. Calculations based on official central bank data, 1.05T yuan worth of reverse repos are set to mature today, meaning that 150B yuan in net cash will be injected. Investors are bracing for a volatile session in Chinese markets when onshore trades resume after a break for the Lunar New Year which was extended by the gov. There will be no further delays to the reopening, the securities market regulator said. The China Securities Regulatory Commission (CSRC) said it had taken the decision after balancing various factors & believed the outbreak's impact on the market would be short term. To support firms affected by the epidemic, the CSRC said companies that had expiring stock pledge agreements could apply for extensions with securities firms & it would urge corp bond investors to extend the maturity dates of debt. The CSRC is also considering launching hedging tools for the A-share market to help alleviate market panic & will suspend evening sessions of futures trading starting from Mon. "We believe that the successive introduction and implementation of policy measures will play a better role in improving market expectations and preventing irrational behavior,'' it told the People's Daily. China is facing mounting isolation as other countries introduce travel curbs, airlines suspend flights and governments evacuate their citizens, risking worsening a slowdown in the world's 2nd-largest economy. State news agency Xinhua said that China's economy was resilient enough to counter the shock caused by the virus & said remarks made by a US federal official - whom it did not name - that the virus could bring jobs back to the US were "self-centered, unprofessional & unethical.'' Secretary of Commerce Wilbur Ross said last week that the virus could force companies to re-evaluate their supply chains, potentially returning some jobs to the US.
US manufacturing activity rebounds in January
The bulls have returned in force, bidding higher stock prices. Today the Volatility Index (VIX) is down a big 1½ to the low 17s . That's in the lower end of its recent range & not far above the mid teens where it was during high points for stock averages. Risk is low & welcomed by investors, at least for the time being.
Dow Jones Industrials
AMJ (Alerian MLP Index tracking fund)
| CL=F | Crude Oil | 51.23 | -0.33 | -0.6% |
| GC=F | Gold | 1,580.20 | -7.70 | -0.5% |
US equity markets were higher, shrugging off the nearly 8% plunge in China's Shanghai Composite, which had been closed since Jan 22 for the Lunar New Year holiday. The early gains have the major averages on track to win back some of the big losses that occurred Fri as the number of confirmed cases of coronavirus surged. The coronavirus outbreak has now sickened more than 17K & killed 361, according to the latest figures released by China's National Health Commission. In response to the outbreak, the People's Bank of China announced plans to inject 1.2T Chinese yuan ($173B) into the system to cushion its blow to the economy. Mon was the first day of trading for Chinese markets, which have been closed since Jan 22. West Texas Intermediate crude oil was little changed near $51.60 a barrel & gold was lower by 0.4% at $1582 an ounce. Treasuriss fell, running the yield on the 10-year note up 2.5 basis points to 1.544%. In Europe, Britain's FTSE was trading down 0.9% in its first day of trading following Brexit while Germany's DAX & France's CAC added 0.3% & 0.4%, respectively. Markets across Asia finished mixed despite the Shanghai Composite's plunge. Hong Kong's Hang Seng edged up 0.2% while Japan's Nikkei fell 1% .
US stocks rebound, Chinese markets plunge as coronavirus outbreak spreads
British Prime Minister Boris Johnson is setting out a tough opening gambit in negotiations with the EU, saying the UK will walk away without a free-trade deal rather than agree to follow rules set by the 27-nation bloc. Just 60 hours after Britain left the EU, the first country ever to do so, Johnson is digging in his heels about future relations. In a speech to business leaders & intl diplomats in London, Johnson plans to say “we want a free trade agreement,” but not at any cost. “The choice is emphatically not ‘deal or no-deal,’” Johnson plans to say. “The question is whether we agree a trading relationship with the EU comparable to Canada’s – or more like Australia’s.” Australian-style trade would mean a panoply of new tariffs & other barriers between the UK & the EU, its near neighbor & biggest trading partner. In their divorce agreement, Britain & the EU agreed to strike an “ambitious, broad, deep & flexible partnership,” including a free trade deal & agreements for security & other areas. They gave themselves 11 months to do it. A post-Brexit “transition period,” in which relations stay essentially unchanged, runs until the end of 2020. For the rest of this year the UK will continue to follow EU rules, although it will no longer have a say in EU decision-making. Britain says it wants a “Canada-style” free trade agreement with the EU covering both goods & services. But it is adamant it won't agree to follow the EU's entire rule book in return for unfettered trade, because it wants to be free to diverge in order to strike other new deals around the world. The bloc insists there can be no trade deal unless Britain agrees to a “level playing field” & does not undercut EU regulations, especially in areas of environmental protections, worker rights & health and safety standards. Johnson intends to double down on Britain's tough stance. “There is no need for a free trade agreement to involve accepting EU rules on competition policy, subsidies, social protection, the environment, or anything similar, any more than the EU should be obliged to accept U.K. rules,” he will say. “The U.K. will maintain the highest standards in these areas — better, in many respects, than those of the EU -– without the compulsion of a treaty. And it is vital to stress this now.” It’s a message aimed as much at a domestic audience as it is at the bloc, but EU leaders are unlikely to be impressed by what they'll see as British intransigence & wishful thinking.
'We want free trade': UK's Johnson talks tough over post-Brexit trade with EU
China's central bank said it will inject 1.2T yuan ($174B) worth of liquidity into the markets via reverse repo operations today as its stock markets prepare to reopen amid an outbreak of a new coronavirus. Chinese authorities have pledged to use various monetary policy tools to ensure liquidity remains reasonably ample & to support firms affected by the virus epidemic, which has so far claimed 305 lives, all but one in China. The People's Bank of China made the announcement yesterday, adding the total liquidity in the banking system will be 900B yuan higher than the same period in 2019 after the injection. Calculations based on official central bank data, 1.05T yuan worth of reverse repos are set to mature today, meaning that 150B yuan in net cash will be injected. Investors are bracing for a volatile session in Chinese markets when onshore trades resume after a break for the Lunar New Year which was extended by the gov. There will be no further delays to the reopening, the securities market regulator said. The China Securities Regulatory Commission (CSRC) said it had taken the decision after balancing various factors & believed the outbreak's impact on the market would be short term. To support firms affected by the epidemic, the CSRC said companies that had expiring stock pledge agreements could apply for extensions with securities firms & it would urge corp bond investors to extend the maturity dates of debt. The CSRC is also considering launching hedging tools for the A-share market to help alleviate market panic & will suspend evening sessions of futures trading starting from Mon. "We believe that the successive introduction and implementation of policy measures will play a better role in improving market expectations and preventing irrational behavior,'' it told the People's Daily. China is facing mounting isolation as other countries introduce travel curbs, airlines suspend flights and governments evacuate their citizens, risking worsening a slowdown in the world's 2nd-largest economy. State news agency Xinhua said that China's economy was resilient enough to counter the shock caused by the virus & said remarks made by a US federal official - whom it did not name - that the virus could bring jobs back to the US were "self-centered, unprofessional & unethical.'' Secretary of Commerce Wilbur Ross said last week that the virus could force companies to re-evaluate their supply chains, potentially returning some jobs to the US.
China to juice markets with liquidity to fight coronavirus downturn
US factory activity unexpectedly rebounded in
Jan after contracting for 5 straight months amid a surge in new
orders, offering hope that a prolonged slump in business investment has
probably bottomed out. The Institute for Supply Management (ISM)
said its index of national factory activity increased to a
reading of 50.9 last month, the highest level since Jul, from an
upwardly revised 47.8 in Dec. A
reading above 50 indicates expansion in the manufacturing sector, which
accounts for 11% of the economy. The ISM index had held below the
50 threshold for 5 straight months. The
forecast called for the index rising to 48.5 in Jan from the previously
reported 47.2 in Dec. The improvement in the ISM data likely
reflects ebbing trade tensions between the US & China. The ISM's forward-looking new orders
sub-index jumped to a reading of 52.0 last month, the highest since May,
from a revised 47.6 in Dec. Manufacturers also reported paying
more for raw materials & other inputs. The measure of prices
paid hit its highest level in 10 months, suggesting some building up of
inflation pressures at the factory level. The factory
employment index rose to 46.6 last month from a revised reading of 45.2
in Dec, suggesting manufacturing payrolls could remain weak.
Factory employment increased by 46K jobs in 2019 after rising 264K
in 2018. The improvement in ISM's closely watched national survey
follows a series of mixed readings on the manufacturing sector at the
regional level. A purchasing manager survey tracking the Chicago
region slumped to a 4-year low in Jan & manufacturing indexes
from the Federal Reserve banks of Richmond & Dallas continued to show
contraction in those districts. But factory activity in areas tracked by
the Philadelphia & Richmond Feds both showed significant improvement
in Jan, tracking more closely with ISM's findings.
US manufacturing activity rebounds in January
The bulls have returned in force, bidding higher stock prices. Today the Volatility Index (VIX) is down a big 1½ to the low 17s . That's in the lower end of its recent range & not far above the mid teens where it was during high points for stock averages. Risk is low & welcomed by investors, at least for the time being.
Dow Jones Industrials
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