Fred Imbert, Eustance Huang
Brendan McDermid | Reuters
As of 3 a.m. ET Monday, Dow Jones Industrial Average futures were up 510 points, pointing to an opening gain of 471.64 points for the index at Monday’s open. S&P 500 and Nasdaq 100 futures also pointed to gains at the open for the two indexes on Monday.
Dow futures briefly fell more than 500 points earlier before recovering. The Dow, S&P 500 and Nasdaq Composite all fell more than 10% last week, their biggest weekly declines since October 2008. They also entered correction territory, down more than 10% from all-time highs notched earlier in February.
Those declines came after a sharp increase in coronavirus cases outside of China. The number of cases continued to increase over the weekend, including in the U.S.
The Japanese yen, often viewed as a safe-haven currency in times of economic uncertainty, weakened 0.11% against the greenback to 108.19 per dollar. It had earlier touched a high of 106.97, an indication Sunday that the risk-off sentiment that sent equity markets tumbling remained after a weekend full of negative coronavirus-related news.
As of Sunday, more than 85,000 cases have been confirmed around the world along with more than 2,900 virus-related deaths. Australia, Thailand and the U.S. reported over the weekend their first coronavirus-related deaths. Rhode Island was the first U.S. state in the east coast to report a coronavirus case. The number of cases in England rose to 35 after 12 new cases were confirmed on Sunday. Cases in China also reported more than 500 new cases on Saturday. New York Gov. Andrew Cuomo confirmed Sunday night the state’s first positive coronavirus case.
“The outbreak of Covid-19 has certainly changed the near-term narrative,” said Chetan Ahya, global head of economics at Morgan Stanley, in a note to clients Sunday. “It is an untimely shock, considering that the starting point of global growth was weak, and the recovery was very nascent.”
Horrible China economic data
A private survey on Chinese manufacturing activity released during Asian trading hours on Monday came in at its weakest level ever. The Caixin/Markit Manufacturing Purchasing Managers’ Index (PMI) came in at 40.3 for February, far below expectations of a reading of 45.7 by economists in a Reuters poll. PMI readings above 50 indicate expansion, while those below that level signify a contraction.
The plunge “shows the extent to which an outbreak can hit an economy,” said Ed Hyman, a widely followed economist on Wall Street and Evercore ISI chairman, in a note to clients. “All this is quite uncertain, and we may be overreacting. But we also don’t want to underreact.”
Gaming revenues in Macau also plunged nearly 88% last month.
Worries over the coronavirus’ impact on corporate profits and the global economy led investors to seek safer alternatives to stocks, pushing U.S. Treasury yields to all-time lows. On Sunday night, the benchmark 10-year rate broke below 1.04% for the first time ever. It was last at 1.0948%.
“Global investors will be prone to panic as the virus arrives at their doorstep, underscoring the need for near-run prudence and patience before augmenting favored holdings,” strategists at MRB Partners wrote in a note. “The outlook is uncertain, or rather certainly bearish in the near term as quarantining spreads around the world, but with considerable doubt as to the duration and depth of the economic fallout.”