Earnings have helped, with fourth-quarter results so far outpacing expectations. With 227 reports through Monday, the S&P 500 was set to post an EPS decline of 0.3% versus a year ago, according to Bloomberg Intelligence. Earnings had been forecast to shrink by 1.9% heading into the season.
Asia Bounce
To be fair, Wednesday was never entirely a risk-off day. Even as U.S. futures and European stocks struggled, the MSCI Asia-Pacific Index of stocks was rallying a second straight day after eight consecutive declines. Measures taken by policy makers in China to support the market are combining with hopes the virus can be contained to lure dip-buyers.
“We continue to believe that the global government response to the coronavirus has been swift and should eventually halt or limit the spread of the disease,” said Kelvin Tay, regional chief investment officer for Asia-Pacific at UBS Global Wealth Management. “Given our view that the earnings and economic impact will be relatively short-lived and limited, we believe the sell-off has opened opportunities.”
Tay sees a favorable backdrop for emerging-market currencies and double-digit earnings growth for Asia ex-Japan stocks. Among currencies, the firm is bullish on the Indian rupee, Indonesian rupiah, Philippine peso and Malaysian ringgit.
The optimism isn’t universal. Mizuho Bank Ltd.’s Vishnu Varathan, head of economics and strategy, reckons the history of the SARS epidemic in 2003 suggests that while the number of people contracting the illness continues to rise, it’s too soon to embark on purchases of cheap assets in Asia at least. Van-Petersen holds similar views.
“It’s too early to call for Asia,” he said in an interview Wednesday. “I don’t think it’s here yet, we’re seeing more of a technical bounce.”
For the rest of the world, optimism continues to build. Economic data has yet to capture the virus impact so remains mostly supportive to risk appetite. Central bankers have signaled they are alert to the threat to growth.
Any potential vaccine for the coronavirus is likely a long way application in human cases. Nonetheless gold erased its gain and oil surged as the headlines landed. The yield on 10-year Treasuries, which closed as low as 1.5068% last week, is now almost 15 basis points higher.
This article was provided by Bloomberg News.