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Mar 11, 2020

Market Extra: The Dow is in a bear market: here’s where the S&P 500 and Nasdaq would have to close to join it

William Watts

The Dow Jones Industrial Average fell sharply Wednesday, ending more than 20% below its all-time closing high from last month and meeting the widely used definition of a bear market. The S&P 500 index and Nasdaq narrowly avoided the same fate.
The Dow DJIA, -5.85% tumbled 1,464.94 points, or 5.9%, to close at 23,553.22, leaving it 20.3% below its record close of 29,551.42 set on Feb. 12. All 30 Dow components fell, with Boeing Co. BA, -18.15% leading the way lower with an 18.2% tumble.
Other key indexes would need to close at or below these levels to enter bear territory, according to Dow Jones Market Data:
S&P 500 SPX, -4.88% — 2,708.92
Nasdaq Composite COMP, -4.70% — 7,853.74
The S&P 500 fell 140.85 points, or 4.9%, to end at 2,741.38 — off 19.04% from its Feb. 19 record close. The Nasdaq dropped 392.20 points, or 4.7%, ending at 7,952.05 — down 19% from its all-time closing high, which was also set on Feb. 19.
See:Coronavirus stock selloff means bull market will ‘soon end’, says Goldman — sees S&P 500 falling another 15%
Stocks saw another day of heavy selling Wednesday, on worries about the economic impact of the COVID-19 epidemic with its disruptions to travel and trade, along with the lack of action on fiscal stimulus by the Trump administration, and a renewed slump in oil prices amid a global price war between Saudi Arabia and Russia that has hit U.S. energy companies and amplified corporate credit worries.
Stocks suffered their largest one-day plunge since 2008 on Monday, coinciding with the 11th anniversary of the start of the S&P 500’s longest bull market in history. Stocks dropped into correction mode — defined as a pullback of 10% — late last month as fears over the economic impact of the coronavirus outbreak began to rise.
SeeHow an ‘oil shock’ and coronavirus combined to spark a global stock-market selloff

Economy: Coronavirus Spurs U.S. Efforts to End China’s Chokehold on Drugs

By Ana Swanson

The Trump administration says the U.S. is too dependent on China for vital drugs. But it’s unclear how much Washington can do to alter global supply chains
Credit...Qilai Shen/Bloomberg
Ana Swanson

  • WASHINGTON — The global spread of the coronavirus is reigniting efforts by the Trump administration to encourage more American manufacturing of pharmaceuticals and reduce dependence on China for the drugs and medical products that fuel the federal health care system.
The effort includes a push by the White House trade adviser Peter Navarro to tighten “Buy American” laws so federal agencies are required to purchase American-made pharmaceuticals and medical equipment, according to people with knowledge of the plans.
The administration has been preparing an executive order, which could be released in the coming days, that would close loopholes allowing the government to purchase pharmaceuticals, face masks, ventilators and other medical products from foreign countries. The hope is that increasing government demand for American-made drugs and medical products will provide an incentive for companies to make their products in the United States, rather than China.
To help facilitate such production, the White House is also pushing for streamlined regulatory approvals for American-made products and more detailed labeling of the origin of products made offshore, these people said.
“China has managed to dominate all aspects of the supply chain using the same unfair trade practices that it has used to dominate other sectors — cheap sweatshop labor, lax environmental regulations and massive government subsidies,” Mr. Navarro said in an interview. “As President Trump has said, what we need to do is bring those jobs home so that we can protect the public health and the economic and national security of the country.”
China is known as the world’s factory for car parts, toys and electronics, but it also churns out much of the penicillin, antibiotics and pain medicines used across the globe, as well as surgical masks and medical devices.
While the United States remains a global leader in drug discovery, much of the manufacturing has moved offshore. The last American plant to make key ingredients for penicillin announced it would close its doors in 2004.
Chinese pharmaceutical companies have supplied more than 90 percent of U.S. antibiotics, vitamin C, ibuprofen and hydrocortisone, as well as 70 percent of acetaminophen and 40 to 45 percent of heparin in recent years, according to Yanzhong Huang, a senior fellow for global health at the Council on Foreign Relations.
Supporters of reducing reliance on China have used the coronavirus epidemic to highlight what they say is a longstanding vulnerability that could leave Americans dangerously short of medicines in the event of a war, trade conflict or pandemic.
“If China shut the door on exports of core components to make our medicines, within months our pharmacy shelves would become bare and our health care system would cease to function,” said Rosemary Gibson, a senior adviser with the Hastings Center and an author of “China Rx: Exposing the Risks of America’s Dependence on China for Medicine.”
“In the event of a natural disaster or global pandemic, then the United States will wait in line with every other country for essential medicines,” she said.
Some in China have also noted these vulnerabilities. An article posted last week by the state news agency Xinhua argued that the world should thank China, rather than blame it for spreading the virus, saying that if China banned the export of drugs, “the United States would sink into the hell of a novel coronavirus epidemic.”
China does not appear to be explicitly blocking the export of pharmaceuticals, though it has cut off exports of face masks by requiring manufacturers to sell masks straight to the government for distribution, leaving none to send overseas.
Factory closings and transportation restrictions in China have disrupted supply chains for drugs as well. Public health officials are watching to see whether the coronavirus epidemic will lead to more shortages of essential drugs in the United States in the coming weeks.
On Feb. 28, the Food and Drug Administration warned that one drug was already in short supply in the United States because of manufacturing issues, and said it was monitoring about 20 others that rely on China.
Last week, the Indian government ordered its pharmaceutical companies to stop exporting 26 drug and drug ingredients, most of them antibiotics. And South Korea, Germany, India, Taiwan and others have clamped down on exports of masks and other protective gear over worries that their own supplies will fall short.
“The coronavirus shows the importance of bringing all of that manufacturing back to America, and we will have that started,” President Trump said in a meeting last week at the White House with the chiefs of major pharmaceutical and biotechnology companies. “It’s already started, frankly. It started about a year ago.”
In Mr. Trump’s lunch meeting with Senate Republicans on Tuesday, Senator Marco Rubio of Florida urged lawmakers to move quickly to leverage government programs, like Small Business Administration loans, to ramp up American production. Mr. Trump agreed with the plan, according to a representative for Mr. Rubio.
“The coronavirus outbreak has made clear we must combat America’s supply chain vulnerabilities and dependence on China in critical sectors of our economy,” Mr. Rubio said in a statement.
He called the administration’s coming executive order “a very strong first step in incentivizing domestic production.”
But there are big questions about how much the government can influence the behavior of private companies and reconfigure a global supply chain that is heavily invested in Chinese manufacturing.
If we want to reduce that dependence, there is no easy fix to the problem,” said Mr. Huang of the Council on Foreign Relations. “Technically I think it’s possible, but unlikely from a cost effectiveness perspective.”
The Trump administration has urged companies making electronics, steel, toys and many other products to move their supply chains out of China, with mixed success.
Some companies have left China in response to tariffs Mr. Trump placed on more than $360 billion of Chinese goods. But many have moved to other low-cost countries like Vietnam, India and Mexico, rather than returning to the United States. And many products that are made in the United States still contain Chinese components.
Critics of China’s dominance of global pharmaceuticals say Beijing has used the same strategies to gain a foothold in drug making that it has in other industries — including generous government subsidies and lax environmental rules.
China is also a key producer of the chemicals that go into making drugs, and home to a vast supply of well-educated but low-paid scientists. And pharmaceutical companies say they are drawn to China as a large and rapidly growing health care market in its own right.
David Gaugh, a senior vice president at the Association for Accessible Medicines, which represents the generics industry, said that the globalization of the supply chain was “a market reality” for all kinds of drug makers, and that the United States had one of the world’s safest drug supply chains.
The Food and Drug Administration does not gather precise figures on the volume of drugs made overseas — only the number of facilities making them. According to that data, 72 percent of manufacturing facilities making active pharmaceutical ingredients for American drugs were overseas, with 13 percent in China.
But Michael R. Wessel of the U.S.-China Economic and Security Review Commission said that those figures understated the American reliance on China, which has some of the world’s largest factories. And when the United States imports finished drugs from Europe and India, they often contain Chinese components as well.
“The coronavirus crisis puts into sharp focus the unacceptable dependence of the U.S. on China for critical medicines and their ingredients,” Mr. Wessel said.
The federal government maintains a strategic stockpile of drugs and medical supplies, but those could fall short in a pandemic. In the private sector, as in many other industries, pharmaceutical companies have shifted from stockpiling goods in warehouses to a “just in time” logistics model that ships products as need arises — reducing costs but also increasing the likelihood of shortages.
The question is whether the government has enough levers to encourage more private companies to rework their supply chains, or encourage new manufacturing start-ups in the United States.
Administration officials say Buy American laws, which require the federal government to purchase American-made products where it can, offer one powerful lever.
The government buys vast amounts of drugs and medical equipment through the Departments of Defense, Health and Human Services, and Veterans Affairs. A series of waivers and trade agreements allow those agencies to purchase products from foreign countries, with the decisions often based on price.
Mr. Navarro is examining agreements struck by the Defense Department, as well as the World Trade Organization’s government procurement agreement, which allow the government to purchase drugs from dozens of countries around the world, according to people with knowledge of the initiative.
Where American-made drugs are not available, the government will still be able to buy foreign drugs. But over time, the administration expects the policy will encourage manufacturers to invest more in the United States.
“If we have strong Buy American procurement, that will establish a robust base level of demand that provides the appropriate incentives for our pharmaceutical manufacturers to invest and locate domestically,” Mr. Navarro said. He added that the United States also needed to invest in “advanced manufacturing technologies” to aid drug production.
The government has funded research in recent years into new types of manufacturing systems that are smaller-scale and more flexible than operations run in China.
The F.D.A. has said these types of operations, which can potentially be reconfigured to produce different types of pharmaceuticals in times of need, could enable American-based manufacturing to regain competitiveness with China and potentially ensure a stable supply of drugs.
But expanding beyond a few trial manufacturing projects in the United States could be hard: Supporters say these projects need more funding and a specialized approval process with the agency.
The issue has attracted the attention of some lawmakers. Mr. Rubio has introduced a bill that would require drugmakers to report to the F.D.A. the source of the active ingredients in their pharmaceuticals, as well as tighten Buy American laws for the Veterans Affairs Department.
Senator Josh Hawley, Republican of Missouri, has introduced separate legislation to give the F.D.A. expanded authority to request sourcing information from drug and device manufacturers. And Representative Anna G. Eshoo, Democrat of California, has set up a bipartisan working group to examine funding and incentives for domestic drug production and introduced legislation to strengthen reporting requirements around drug shortages.
Keith Bradsher contributed reporting from Shanghai, Katie Thomas from Chicago and Emily Cochrane from Washington.
  • Updated March 10, 2020
    • What is a coronavirus?
      It is a novel virus named for the crownlike spikes that protrude from its surface. The coronavirus can infect both animals and people and can cause a range of respiratory illnesses from the common cold to lung lesions and pneumonia.
    • How contagious is the virus?
      It seems to spread very easily from person to person, especially in homes, hospitals and other confined spaces. The pathogen can travel through the air, enveloped in tiny respiratory droplets that are produced when a sick person breathes, talks, coughs or sneezes.
    • Where has the virus spread?
      The virus, which originated in Wuhan, China, has sickened more than 121,000 in at least 108 countries and more than 4,300 have died. The spread has slowed in China but is gaining speed in Europe and the United States.
    • What symptoms should I look out for?
      Symptoms, which can take between two to 14 days to appear, include fever, a dry cough, fatigue and difficulty breathing or shortness of breath. Milder cases may resemble the flu or a bad cold, but people may be able to pass on the virus even before they develop symptoms.
    • What if I’m traveling?
      The C.D.C. has advised against all non-essential travel to South Korea, China, Italy and Iran. And the agency has warned older and at-risk travelers to avoid Japan.The State Department has advised Americans against traveling on cruise ships.
    • How long will it take to develop a treatment or vaccine?
      Several drugs are being tested, and some initial findings are expected soon. A vaccine to stop the spread is still at least a year away.

Press Release: CPI for all items up 0.1% in February as shelter, food increases outweigh energy decline

In February, the Consumer Price Index for All Urban Consumers rose 0.1 percent on a seasonally adjusted basis; rising 2.3 percent over the last 12 months, not seasonally adjusted. The index for all items less food and energy rose 0.2 percent in February (SA); up 2.4 percent over the year (NSA).

HTML | PDF | RSS | Charts | Local and Regional CPI    

US Politics: Bernie Sanders wins the North Dakota Democratic caucus, NBC News projects

Yelena Dzhanova

GP: Bernie Sanders Missouri
Democratic presidential hopeful Bernie Sanders addresses a ‘Future to Believe In’ rally at the Family Areana on March 14, 2016 in St. Charles, Missouri.
Michael B. Thomas | AFP | Getty Images

Sen. Bernie Sanders, I-Vt., will win the North Dakota Democratic presidential caucus, NBC News projects.
North Dakota has 14 delegates at stake, the smallest prize offered on the March 10 Democratic contests.
Sanders’ victory comes after former Vice President Joe Biden, his chief Democratic rival in the 2020 election, earned a series of early wins Tuesday.
In the 2016 primary, the Vermont senator also won the state, sweeping Democratic rival Hillary Clinton with 64% of the vote to her 26%, according to NBC News.
Michigan, Idaho, Washington, Mississippi and Missouri were also among the states that voted Tuesday. Of those states, Michigan, which Biden won, boasts the largest pledged delegate count, with 125 on the line.
Biden also won Missouri, Mississippi and Idaho. Washington remains too close to call.
The latest round of primaries came a week after Super Tuesday, during which Biden won surprise victories and eked out a pledged delegate lead over Sen. Bernie Sanders. Rep. Tulsi Gabbard of Hawaii remains in the race, but the contest for the Democratic nomination has fallen largely between Biden and Sanders.
In the last two weeks, Biden has received a slew of highly coveted endorsements from his former Democratic rivals who have since dropped their 2020 bids. Former South Bend, Indiana, Mayor Pete Buttigieg, along with with Sens. Amy Klobuchar of Minnesota, Cory Booker of New Jersey and Kamala Harris of California, endorsed him, citing him as the candidate best positioned to beat Trump in November.

Coronavirus Live Updates: Germany's Merkel says most people will get COVID-19, Italy hikes outbreak spending

Dawn Kopecki,William Feuer

Chart: Coronavirus global spread 200311

  • Global cases: More than 119,476, according to data compiled by Johns Hopkins University.
  • Global deaths: At least 4,291, according to data compiled by Johns Hopkins University.
  • US cases: At least 1,039, according to data compiled by Johns Hopkins University.
  • US deaths: At least 29, according to data compiled by Johns Hopkins University.

7:58 am: Germany’s Merkel says most people will get infected

German Chancellor Angela Merkel speeches during her meeting with Russian President Vladimir Putin (not pictured) at Meseberg governmental house August 18, 2018 in Gransee, Germany.
Mikhail Svetlov | Getty Images
Up to 70% of the population is likely to be infected with the coronavirus that is currently spreading around the world, German Chancellor Angela Merkel said, adding that since there was currently no cure the focus had to be on slowing its spread.
“When the virus is out there, the population has no immunity and no therapy exists, then 60% to 70% of the population will be infected,” she told a news conference in Berlin. “The process has to be focused on not overburdening the health system by slowing the virus’s spread... It’s about winning time.”
Those remarks come as local authorities in Germany reported the third death in the country of a COVID-19 patient. Germany has at least 1,613 cases of the virus, according to Johns Hopkins University. —Reuters

7:12 am: Iran reports 63 new deaths

Iran’s death toll reached 354, a rise of 63 in the past 24 hours, a health ministry spokesman said. COVID-19 has infected around 9,000 across the country, Kianush Jahanpur told state TV, calling on people to avoid unnecessary trips and stay at home. —Reuters

7:08 am: US cases surpass 1,000, up ten-fold from a week ago

A woman visits Times Square as she wears a face mask on March 8, 2020 in New York City.
Kena Betancur | Getty Images
COVID-19 cases surpassed 1,000 in the United States overnight as the new flu-like coronavirus sweeps across the country. The virus is now present in at least 35 states and the District of Columbia, according to the Centers for Disease Control and Prevention. Almost half of all U.S. cases are in Washington state, California and New York, where the governors have all declared states of emergency to free up funding for communities battling outbreaks. There were just over 100 confirmed cases in the U.S. on March 4, according to the World Health Organization. —Feuer

6:37 am: Italy hikes response spending to $28 billion, says further restrictions could come

An employee of the municipal company Veritas sprays disinfectant in public areas at the Rialto Bridge in Venice on March 11, 2020.

6:14 am: Beijing city tightens travel restrictions for all inbound travelers

A Chinese woman slides steam buns down a ramp used to prevent touching and contact as the customer takes his order at a local take out on February 19, 2020 in Beijing, China.
Kevin Frayer | Getty Images
China’s capital city said all travelers from overseas must self-quarantine for 14 days at home or in a hotel, regardless of whether their country of origin has been hit seriously by COVID-19. Previously, the municipal authorities said the quarantine only applied to travelers from high-risk countries. The policy change came after the city reported Tuesday that all six new confirmed new coronavirus cases were from people returning from abroad, five from Italy and one from the U.S. —Wu

6:07 am: IHS Markit lowers global growth forecasts

Economic research firm IHS Markit estimates that global growth in 2020 will be 1.7%, compared with 2.5% in its February forecast, and 2.7% in 2021 compared with an earlier forecast of 2.8%.
“While the U.S. economy will be hurt by the effects of the virus, we believe that the momentum of the economy is strong enough to avoid a recession,” its chief economists said Wednesday. “Europe is likely to be harder hit, with Germany and Italy in or near recession before the epidemic. This could well drag the rest of the euro zone into recession.” —Ellyatt

US Markets | Futures Indicator Update: Futures losses accelerate as Wall Street is in for another wild day, Dow set to drop 800 points

Silvia Amaro,Fred Imbert

U.S. stock futures fell sharply on Wednesday as investors worried about a possible fiscal stimulus package aimed at curbing slower economic growth due to the coronavirus outbreak.
Around 8:20 a.m. ET, Dow Jones Industrial Average futures indicated a loss of more than 800 points at the open. S&P 500 and Nasdaq 100 futures also pointed to steep losses.
President Donald Trump suggested Tuesday a 0% payroll tax rate that could last until the end of the year. However, the timing of such policies being implemented remains uncertain.
“We need to see meaningful support for economic activity and credit backstops especially for small businesses, not a targeted approach executed only by the executive branch,” Joe Kalish, chief global macro strategist at Ned Davis Research, said in a note. “We will likely need congressional involvement.  This is a potential solvency problem.”
Trump’s comment came as the number of coronavirus cases around the world total more than 100,000, according to data from Johns Hopkins University. In the U.S. alone, more than 1,000 cases have been confirmed. This increase in cases added to fears of a global economic slowdown.
Oil prices fell along with Treasury yields. U.S. crude fell more than 3% to $33.17 per barrel. Meanwhile, the benchmark 10-year note yield traded at 0.7%.
Central banks have also taken action to curb slower economic growth. The Bank of England on Wednesday cut its benchmark rate by 50 basis points to 0.25%.The move follows a 50 basis-point rate cut by the Federal Reserve earlier this month.
The move down in futures comes after the major averages regained a chunk of their losses on Tuesday. The Dow rallied more than 1,100 points while the S&P 500 had its best one-day performance since Dec. 26, 2018.
“Stocks posted impressive headline gains, but more strength needs to be seen beneath the surface to have confidence that the downside momentum in stocks has been broken,” Willie Delwiche, investment strategist at Baird, said in a note. “The weight of the evidence continues to argue for caution in the near term and we recommend that investors remain patient in the face of ongoing market volatility.”
The uncertainty around fiscal stimulus, coupled with a reduction in travel demand and rising coronavirus cases, pressured airline and cruise line stocks. American, Delta, United and JetBlue all fell more than 2% in the premarket. Norwegian Cruise Line and Carnival fell 4.4% and 7%, respectively.
In terms of data, there will be monthly consumer price figures at 8:30 a.m. ET and federal budget numbers are due at 2 p.m. ET.

Market Insider | Biggest Moves Premarket: Stocks making the biggest moves in the premarket: PepsiCo, Apple, Express, Eli Lilly & more

Peter Schacknow

Take a look at some of the biggest movers in the premarket:

PepsiCo (PEP) – The snack and beverage giant announced a deal to buy energy drink maker Rockstar Energy for $3.85 billion, expanding its presence in the energy drink segment.
Apple (AAPL) – Bank of America Securities cut its price target for the stock to $320 per share from $350, as it lowers earnings estimates. BofA predicts supply constraints for Apple to last until April or May due to virus-related labor shortages.
Express (EXPR) – The apparel retailer reported quarterly earnings of 19 cents per share, a penny a share above estimates. Revenue also beat forecasts. Comparable-store sales fell by 3%, however, greater than the 2.7% drop predicted by analysts who were surveyed by Refinitiv. The company is also forecasting a larger-than-expected current-quarter loss.
DXC Technology (DXC) – DXC will sell its Medicaid services unit to private-equity firm Veritas Capital for $5 billion in cash. DXC had said in November it would consider alternatives for the unit, so it could focus on enterprise technology solutions. DXC was formed in 2017 through the merger of Computer Sciences and the enterprise services unit of Hewlett Packard Enterprise (HPE).
Bank of America (BAC) – Bank of America chief technology officer Howard Boville has left the bank, according to a source who spoke to Reuters. He will not be replaced, with his duties split across the bank’s various business segments.
Fiat Chrysler (FCAU) – Fiat Chrysler said it would temporarily close plants across Italy to minimize the risk of spreading the coronavirus. The automaker said administrative areas will continue normal activities, while complying with any directives from the Italian government.
Regeneron Pharmaceuticals (REGN), Sanofi (SNY) – The two drugmakers are readying tests of their Kevzara rheumatoid arthritis drug as a possible treatment for symptoms of the coronavirus.
Hilton Worldwide (HLT) – The hotel operator has withdrawn its financial guidance for the current quarter and the full year, due to the unknown impact of the coronavirus on its business.
Cloudera (CLDR) – Cloudera reported profit of 4 cents per share for its fiscal fourth quarter, compared to a consensus estimate of a loss of 3 cents per share. The cloud-computing company’s revenue also exceeded Wall Street forecasts, and it issued an upbeat outlook.
Korn Ferry (KFY) – Korn Ferry reported fiscal third-quarter profit of 75 cents per share, 2 cents a share above estimates. The consulting firm’s revenue also beat forecasts, however the company said the coronavirus outbreak has “clouded the near-term predictability of our business.”
Eli Lilly (LLY) – Eli Lilly was added to the “Conviction Buy” list at Goldman Sachs, which said the drugmaker’s growth profile is among the strongest in the U.S. large-cap biopharma sector.

Technology News: TikTok steps up transparency efforts after privacy concerns in United States

Reuters Editorial

FILE PHOTO: Tik Tok logo is displayed on the smartphone while standing on the U.S. flag in this illustration picture taken, November 8, 2019. REUTERS/Dado Ruvic/File Photo
(Reuters) - Social media app TikTok is launching a content moderation center in a bid to boost transparency, the Chinese company said on Wednesday, as it faces scrutiny from U.S. lawmakers who have accused it of sharing user data with the Chinese government.
The "Transparency Center" is to be opened at TikTok's Los Angeles office where external experts will oversee its operations, the company said in its blog
The center would later provide insights into the app’s source code, the closely guarded internal instructions of the software, and offer more details on privacy and security.
Several U.S. agencies that deal with national security and intelligence issues have banned employees from using the app, whose popularity among teenagers has been growing rapidly.
According to a 2017 Chinese law, companies operating in the country are required to cooperate with the government on national intelligence.
The U.S. Navy banned the app in December from its government issued mobile devices, calling it a “cybersecurity threat”. Later that month, TikTok published its first transparency report on the “volume and nature” of governmental requests for its users’ account information.
Republican Senator Josh Hawley called for a blanket ban on the app for all federal employees last week, representing a broader concern among lawmakers about collection and sharing of data on U.S. users with the Chinese government.
The company has however refuted claims and has said that U.S. user data is stored in the United States and that China does not have jurisdiction over content that is not in China.
TikTok, owned by Chinese tech company ByteDance, allows users to create and share short videos with special effects, and is hugely popular in Southeast Asia, including India.
Reporting by Neha Malara in Bengaluru; Editing by Vinay Dwivedi