February 14th, top 5 Things to Know in the Market on Friday

The Covid-19 virus continued its spread amidst confusion over China’s statistics. The U.S. intensified the pressure on Huawei, and its potential 5G customers, by bringing racketeering charges against the telecoms company. The dollar hit its highest in over four months as the Fed trimmed its repo operations. Nvidia’s blowout earnings are likely to support U.S. stocks at the opening – unless data on retail sales, industrial production and consumer sentiment dictate otherwise. Here’s what you need to know in financial markets on Valentine’s Day, 2020.

1. Covid confusion: Singapore warns of recession, HK cases hit 56

Confusion reigned over the spread of the Covid-19 virus after Chinese authorities took over 100 presumed victims off the official death, saying it had double-counted. The overall death toll still rose by over 100 to 1,383, while officially confirmed cases in China rose by some 5,000 to over 64,000. That’s a big drop from the 15,000 increase reported on Thursday, which was down to changes in China’s methodology for classifying confirmed cases.

Also on Friday, China’s National Health Commission said 1,716 health workers had contracted the virus, and six of them had died – the first time it had broken out such numbers.

Hong Kong, which has now confirmed 56 cases, said tourist arrivals had fallen by over 50% in January. HSBC Holdings and Royal Dutch Shell joined the list of companies sending workers home from their Singapore and Hong Kong offices in response to reports of infections. Singapore’s Prime Minister said the island state could face recession due to the virus. Pharma giant AstraZeneca warned of a possibly significant hit to its business this year from the virus.

2. U.S. charges Huawei with racketeering

The U.S. formally charged Huawei with racketeering, citing years of intellectual property theft.

The measures underline the U.S.’s continuing efforts to keep pressure on Beijing against the backdrop of ongoing trade tensions, and in particular its efforts to stop the spread of Huawei’s global presence in 5G networks.

The move comes only days after the U.S. charged four Chinese military personnel with theft in hacking the networks of credit reporting giant Equifax.

3. King Dollar hits four-month high

The dollar hit its highest level since late September against its developed-market peers as the euro hit its lowest since 2017 on the back of weak growth numbers.

The euro zone’s economy grew by only 0.9% on the year in the fourth quarter, according to data from Eurostat that were revised down from original estimates. In quarterly terms, GDP eked out 0.1% growth as Germany, the region’s biggest economy, stagnated.

The dollar index hit an overnight high of 99.04, before retreating to 98.968 as of 6:30 AM ET. It’s risen 2% in the last month.

The greenback has also advanced against most emerging market currencies since the Covid-19 outbreak hit. Commodity currencies in particular have suffered – the rand, real and ruble losing between 3.2% and 4.2% over the last month. The exception has been the peso, which hit new highs overnight despite another 25 basis point rate cut from the central bank on Thursday.

A further factor strengthening the dollar was the Federal Reserve’s decision to scale down its daily and two-week repo operations a little ahead of schedule, tightening liquidity in U.S. funding markets.

4. Stocks set to shrug off virus concerns; Nvidia earnings blow past forecasts

U.S. stocks are set to open higher, shrugging off losses made late on Thursday, shrugging off the dollar’s rise, which may weigh on the earnings of multinationals and big exporters over the rest of the year.

By 6:40 AM ET, the Dow 30 futures contract was up 24 points or 0.1%, while the S&P 500 Futures contract was up 0.1% and the Nasdaq 100 was up 0.3%.

The Nasdaq in particular was supported by chipmaker Nvidia, whose quarterly earnings handsomely beat expectations after the closing bell on Thursday, thanks to strong demand for its data center and gaming chips. Sales in the fourth quarter rose 41%, while adjusted earnings per share more than doubled. The company said it had reduced expectations for Chinese sales by $100 million in the current quarter, but its forecast for overall sales was still above consensus forecasts.

5. U.S. retail sales, industrial output data due

After a light week for data, the U.S. releases numbers for January’s retail sales at 8:30 AM ET, with analysts expecting a 0.3% increase on the month in both the headline number and the core retail sales component.

Data for industrial production and manufacturing output in January follow at 9:15 AM, while the University of Michigan’s consumer sentiment index is due out at 10 AM.

Federal Reserve Chairman Jerome Powell told Congress this week that there had been no visible impacts on the U.S. economy so far from the Covid-19 outbreak, and that the Fed would only react to “persistent” and “material” effects, given the ongoing strength of the U.S. economy./Investing.com

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