There are concerns Australian shares could fall this week, with the growing number of coronavirus cases expected to hurt global markets.
The futures market is pointing to a 31 point drop when trade begins tomorrow, after Wall Street saw a drop on Friday.
How the virus has impacted Australian stocks so far
Australia’s benchmark S&P/ASX200 index finished Friday up 2.5 points, or 0.04 per cent, at 7,090.5 points, despite worry about the coronavirus.
Blood products and influenza vaccine maker CSL drove those gains, pushing through the $310 a share mark for the first time to close 1.1 per cent higher at $310.70.
As of today, more than 2000 cases of coronavirus have been confirmed worldwide and 80 people have died, according to the World Health Organisation (WHO).
Stephen Innes, Asia Pacific Market Strategist at AxiCorp, says concerns about the virus continue to impact trade.
“Traders who would be typically discussing the weekend football results are now sadly focusing on mortality scores this morning,” he said in a research paper today.
Not only is spread of the disease quickened by increased travel to and from China due to the Lunar New Year, the biggest threat to the global economy is from any economic shock to China’s colossal industrial and consumption engines spreading rapidly to other countries through the increased trade and financial linkages.
Locally this week, investors are waiting to see the Reserve Bank of Australia’s quarterly consumer price index data for the three months to December this week.
Inflation is a crucial consideration for the RBA in setting the cash rate – and many analysts are still expecting two rate cuts this year.
The Australian dollar was buying 68.16 US cents at noon today, down from 68.46 US cents at the market close on Friday.
Coronavirus and the overseas market
Wall Street fell in a broad sell-off on Friday, as investors fled equities on growing concerns over the scope of the coronavirus outbreak, capping the S&P 500’s worst week in six months.
All three major US stock averages turned sharply negative, with the S&P 500 seeing its biggest one-day percentage drop in over three months after the Centre for Disease Control and Prevention confirmed the second case of the virus on US soil, this time in Chicago.
S&P 500 and Dow wrapped up their worst week since August and the Nasdaq snapped a six-week winning streak.
Market participants kept a wary eye on developments surrounding the coronavirus, which WHO deemed “an emergency in China”.
“Markets hate uncertainty and the virus has been enough to inject uncertainty in the markets,” David Carter, chief investment officer at Lenox Wealth Advisors in New York, said.
But some analysts believe the investors were looking for a reason to take money off the table.
“The virus is really more an excuse to take profits right now,” Sam Stovall, chief investment strategist of CFRA Research in New York, said.
Paul Nolte, portfolio manager at Kingsview Asset Management in Chicago, agreed.
“The markets are expensive and were looking for a reason to go down, and (the virus) is the excuse to do it,” Mr Nolte said.
Shares in Asia continue to drop as concerns grow
Asian shares are continuing to slide as investors shun equities on growing concerns over the scope of the virus outbreak, with safe-haven assets such as the Japanese yen and Treasury notes in greater demand.
US S&P 500 mini futures shed 1.2 per cent in early Asian trade. The Nikkei futures traded in Chicago suggested Japanese shares are on course for a steep 2.0 per cent decline.
Media coverage over the spread of the virus in China and across the globe is also having a direct impact on stocks.
“All you see is headlines about the coronavirus, giving investors a reason to sell the markets,” Takeo Kamai, head of executions services at CLSA in Tokyo, said.
China’s Cabinet also announced it will extend the week-long Lunar New Year holiday by three days to February 2 and schools will return from their break later than usual, state broadcaster CCTV said.
Market participants kept a wary eye on developments surrounding the coronavirus.
Trade in Asia has already slowed for the Lunar New Year and other holidays, with financial markets in China, Hong Kong and Australia closed today.
In the currency market, the concerns about the virus supported the yen, often perceived as a safe haven because of Japan’s net creditor status.
The Japanese currency strengthened as much as 0.49 per cent to 108.73 yen per US dollar, a two-and-a-half-week high.