NEW YORK, Feb 4 ― The dollar strengthened and a gauge of global stocks jumped yesterday, lifted by an unexpected rebound in US manufacturing that helped temper fears that caused stocks overnight in Asia to plunge on the potential impact of the coronavirus in China.
Gold fell 1 per cent, retreating from a four-week high, as China's efforts to protect its economy from the virus and the injection of 1.2 trillion yuan (RM716 billion) worth of liquidity into the markets helped stem inflows into safe-haven assets.
Bond yields rose, while the Japanese yen and Swiss franc retreated as risk sentiment improved despite a rising infection rate and death toll from the outbreak.
Deaths rose to 361 as of Sunday, up 57 from the previous day, China's National Health Commission said. All deaths have occurred in China, with the exception of a Chinese man who died in the Philippines after traveling from Wuhan, the epicenter of the outbreak.
Oil prices fell about 3 per cent, however, on concerns crude demand from China will take a hit, though the possibility of deeper output cuts by the Organization of the Petroleum Exporting Countries and its allies offered some price support.
Shares in China plunged during the first day of trading since China closed equity, currency and bond markets on January 23 for the Lunar New Year, a break that was extended by the government because of the coronavirus.
The Shanghai Composite index fell 7.7 per cent, slicing US$420 billion in value from the benchmark, and the yuan opened at its weakest level this year, sliding past 7 per dollar.
Japan's Nikkei dropped 1 per cent to the lowest since November and Australia's benchmark index fell 1.3 per cent.
Shares edged higher in Europe on relief the UK finally exited the European Union, while US stocks advanced as data showed factory activity unexpectedly rebounded in January after contracting for five straight months amid a surge in new orders.
The Institute for Supply Management (ISM) said its index of US manufacturing rose to 50.9 last month, the highest since July, from an upwardly revised 47.8 in December.
A reading above 50 indicates expansion in the manufacturing sector, which accounts for 11 per cent of the US economy.
Joseph LaVorgna, chief economist for the Americas at French bank Natixis in New York, said he was bullish on the US economic outlook and that capital expenditures by corporations should pick up.
“The ISM helped. It was better than expected. We're still in a bull market, there's still a buy-the-dip mentality,” LaVorgna said, though he acknowledged “the coronavirus can still play havoc; you got to be worried.”
Karl Schamotta, chief market strategist at Cambridge Global Payments in Toronto, said traders were bargain-hunting in anticipation of stimulus from the Chinese government.
“Traders are looking for value where they can,” he said.
MSCI's gauge of stocks across the globe gained 0.31 per cent and its emerging market index lost 0.14 per cent.
The pan-European STOXX 600 index rose 0.25 per cent.
The major Wall Street indexes advanced in a broad rally.
The Dow Jones Industrial Average rose 143.78 points, or 0.51 per cent, to 28,399.81. The S&P 500 gained 23.4 points, or 0.73 per cent, to 3,248.92 and the Nasdaq Composite added 122.47 points, or 1.34 per cent, to 9,273.40.
The pound slid after British Prime Minister Boris Johnson set out tough terms for EU talks, rekindling fears Britain would reach the end of an 11-month transition period without reaching a trade deal.
Sterling traded at US$1.2993, down 1.56 per cent on the day and the dollar index rose 0.45 per cent.
The euro down 0.31 per cent to US$1.1059, while the yen weakened 0.26 per cent versus the greenback at 108.69 per dollar.
Benchmark 10-year notes last fell 2/32 in price to lift their yield to 1.5238 per cent.
Oil prices fell. Brent crude fell US$2.17 to settle at US$54.45 a barrel, while US West Texas Intermediate (WTI) crude fell US$1.45 to settle at US$50.11 a barrel. Both the global and US benchmarks traded at lows last seen in January 2019.
Spot gold, which posted its best month in five in January, slid 0.85 per cent to US$1,576.30 an ounce. US gold futures settled 0.3 per cent lower at US$1,582.40. ― Reuters
