| By Julia Horowitz • Monday, January 27 | | | | Good morning! I'm back in cloudy London after a week covering the World Economic Forum in Davos. A warm hello to the new readers who've joined us in the meantime.
In today's newsletter: Coronavirus rocks stocks and oil prices, and how US tech giants could still drive the week. Plus, traders look ahead to the Iowa caucuses.
US stocks are poised to drop sharply at the open. Dow futures dipped as much as 500 points, or 1.6%, before recovering some losses. The Nasdaq is headed for an even bigger loss.
Britain's FTSE 100 and Germany's DAX both fell more than 2% in early trading. Japan's Nikkei slid 2% on a light trading day in Asia, with most markets closed for the Lunar New Year.
▸ Forwarded this newsletter? Want global markets news and analysis from CNN Business reporters every morning? You can sign up here. | | | What's happening now in markets: MARKET DATA AS OF 6:25 AM ET | | MARKET FLASH Coronavirus fears rock stocks and oil prices
Global markets are stumbling again on Monday as investors worry that the coronavirus outbreak could knock economic growth.
The latest: The death toll from the Wuhan coronavirus now stands at 80, with more than 2,700 cases confirmed across China. Nearly 60 million people have been affected by partial or full lockdowns in Chinese cities as the country's government steps up its response.
There are more than 50 confirmed cases in 13 places outside of mainland China, including at least five in the United States.
Market update: The escalating situation has sent Dow futures down more than 400 points. European markets slid in early trading, while Brent crude, the global benchmark for oil prices, is down more than 3%, close to $58.50 per barrel. | |
Oil prices have tumbled by about 10% since January 17, when Chinese authorities confirmed the death of a second person in the outbreak.
Giovanni Staunovo, commodities analyst at UBS, told me that concerns about supply at the beginning of the month have given way to fears about flagging demand.
"In recent months, half of the oil demand growth rate has come from China," he said. "If because of this virus, people are not moving around, it will probably have an impact." Lower global demand for jet fuel could also ding crude oil demand, Staunovo added.
With Brent crude futures below $60 per barrel, Staunovo expects we'll start to hear more optimistic comments from OPEC. Saudi energy minister Prince Abdulaziz bin Salman said Monday he was confident that the spread of the virus could be contained, according to Reuters.
"Such extreme pessimism occurred back in 2003 during the SARS outbreak, though it did not cause a significant reduction in oil demand," the minister said.
Read more: How the coronavirus is already hurting global business | | VOICES A fragile global economy on alert "We certainly expect there to be an impact on our economy, business and consumer confidence this year, especially as the situation is expected to persist for some time."
CHAN CHUN SING, SINGAPORE'S TRADE MINISTER
Read more on efforts in Southeast Asia to contain the virus. | | EARNINGS MONITOR How US tech giants could drive stocks this week | |
Concerns about the spreading Wuhan coronavirus will be front of mind this week, with the death toll continuing to rise and the number of confirmed cases soaring.
But the downside for US stocks could remain somewhat limited, with four of the five largest companies in the S&P 500 due to report earnings. Apple will share results from the final three months of 2019 on Tuesday, followed by Facebook and Microsoft on Wednesday and Amazon on Thursday.
A strong showing from these players could remind investors that US economic growth still looks solid, sending them back into riskier assets.
Take note: Goldman Sachs strategists observed in a recent note that the five largest stocks currently account for 17% of value of the S&P 500 (a stat familiar to readers of this newsletter!). That's the highest concentration in the past 30 years, outside of the tech bubble at the turn of the century.
This concentration gives these companies outsize potential to move markets, per Goldman. In an election year, it's also a good reason to keep an eye on talk about increased regulation, which the investment bank notes could drive shares lower. | | UP NEXT
Sprint reports results before US markets open. Whirlpool follows after the close.
Also today →
▸ New US home sales for December arrive at 10 a.m. ET.
Coming tomorrow: A big week for US earnings continues with 3M, Apple, Harley-Davidson, Lockheed Martin, Pfizer and Starbucks.
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WHAT WE'RE READING AND WATCHING
▸ Kobe Bryant leaves behind a sprawling business empire (CNN Business)
▸ UK set to approve limited 5G role for Huawei (Financial Times)
▸ Virus hits Hong Kong as its economy is still catching its breath (WSJ)
▸ Regulator probes board in Credit Suisse spying scandal (Reuters)
▸ Hiring at US companies shows signs of cooling (Bloomberg) | | | FINAL WORD Traders look ahead to the Iowa caucuses
We're one week out from Iowa caucuses, the first big event in the US Democratic primary — and investors are starting to pay closer attention to who will challenge President Donald Trump come November.
As Deutsche Bank strategist Jim Reid pointed out in a note to clients Monday morning: "It seems that Bernie Sanders has edged into the lead in the Democratic nomination race over the weekend with a probability of between 35-40% in bookmaker markets. He was [fifth] in the race and only just above 5% in mid October."
Reid notes that in Deutsche Bank's last monthly investor sentiment poll, 90% of those surveyed thought a Sanders presidency would be "negative" for US stocks. That leads him to pose the question: Should markets be factoring in more election-related risk?
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