Dubai: The panic of a fast-spreading coronavirus was limited to Asian stocks on Tuesday, as US, European and other markets outside the world’s most populous continent were seen recovering.
Global markets as a whole traded mixed. While investors abandoned markets in Asia, stocks in Europe rebounded modestly from the previous day’s record sell-off. Stock market futures in the US rose as well. This however came a day after the Dow posted its worst day since October and turned negative for the year.
“You would expect some let-up after such a big move lower and indeed US futures are indicating a higher open,” said Jasper Lawler, head of research at London Capital Group.
The CBOE Volatility Index (VIX), widely considered to be the best fear gauge on Wall Street, however jumped to around 21.4 from 14.5 at the start of the week.
In our view the rise in the global level of uncertainty will remain high in the next three weeks — at the very least. So, keep your distances from risk.
No end to Asia sell-off
A period of uncertainty loomed for Asia-focused markets and investors, with the flu-like illness having killed 106 people and sickening more than 4,500 to date.
Many Asian stock markets were closed for the Lunar New Year holiday, but those that were open, including Japan’s Nikkei and South Korea’s Kospi, fell and futures trading in China slumped. Trading is scheduled to resume in Hong Kong on Wednesday. The latest guidance from China, where the outbreak is still concentrated, is for markets to reopen on Monday.
Even if the coronavirus outbreak is brought under control quicker than SARS was in 2003, multiple analysts suggested that the economic impact in China now looks likely to be of at least a similar scale, but reminded that the economy had bounced back then.
High risk remains
“In our view the rise in the global level of uncertainty will remain high in the next three weeks — at the very least,” said Stephane Barbier de la Serre of Makor Capital. “So, keep your distances from risk.”
After a stellar 2019 for most risky assets, we think that they will generally make only small gains in 2020, said John Higgins, Chief Markets Economist at Capital Economics, adding that although the effects of the coronavirus outbreak on markets will eventually unwind, the global recovery will be “uneven and weaker than investors had hoped.”
Whether we’ve seen an end to the correction already or today is a dead-cat bounce might hinge on fourth-quarter results from Apple and others, Lawler added.
US and European stocks pulled away from losses as investors keep an eye on an earnings-heavy day stateside. With Apple, Starbucks, and eBay reporting, a few more big names like Boeing, Facebook and Microsoft will release their results on Wednesday.
UAE indices settles after prior sell-off
Trading on UAE’s major indices turned passive on Tuesday, a day after indexes in Dubai and Abu Dhabi recorded steep declines on the back of the first set of lacklustre UAE corporate results.
The Dubai Financial Market (DFM) index ended up 0.1 per cent at 2,792 points, while the Abu Dhabi Securities Exchange (ADX) was up 0.2 per cent to 5,178 points. Both the indices had dropped 1.2 per cent on Monday.
The country’s biggest bank First Abu Dhabi Bank advanced 0.3 per cent after posting a 4 per cent increase in 2019 profit. However, the lender — like its peers Emirates NBD and ADCB — flagged higher impairment charges.
Dubai’s index edged up after four days of declines, with Dubai Islamic Bank gaining 0.4 per cent. National Central Cooling Co (Tabreed) surged 6.3 per cent after reporting that full-year profit rose more than 10 per cent.