By Lorcan Roche Kelly
Chinese officials dramatically moved to shut down travel from Wuhan, the city of 11 million people which is the source of the outbreak of a new SARS-like virus. China confirmed 571 coronavirus cases with 17 deaths as of Jan. 22, according to the National Health Commission. The move to restrict travel comes just ahead of the very busy Lunar New Year holiday where people traditionally return to their home towns. Investors took a cautious stance ahead of the week-long trading break, pushing the Shanghai Composite Index 2.8% lower.
The European Central Bank will announce its latest monetary policy decision at 7:45 a.m. Eastern Time this morning. While there is no expectation for a change in rates, the press conference 45 minutes after the announcement will be closely watched as President Christine Lagarde is expected to sketch the outlines of the strategic review. The will be first major look at how the bank implements its mandate, and while it is likely to concentrate on an assessment of the ECB’s performance since the last such exercise in 2003, it will also encompass new topics such as the climate and digital currencies.
Having reached a phase one trade deal with China, it seems American attention is turning to Europe. Speaking at the World Economic Forum in Davos, Switzerland this morning Commerce Secretary Wilbur Ross said the U.S. was still considering slapping levies on European auto imports even as it hopes for a “peaceful resolution” of differences. This follows comments from President Donald Trump yesterday where he said Europe is “more difficult to do business with than China.” The U.S. administration is seeking to complete a new trade deal with the bloc ahead of the 2020 election in November.
The selloff in Chinese stocks has not lead to a major reversal in global indexes. Overnight the MSCI Asia Pacific Index slipped 0.7% while Japan’s Topix index ended the session 0.8% lower as risk aversion boosted the yen. In Europe the Stoxx 600 Index was down 0.1% by 5:50 a.m. with travel and resource stocks the worst performers. S&P 500 futures pointed to little change at the open, the 10-year Treasury yield was at 1.745% and gold slipped.
It’s Thursday, so weekly initial jobless claims are due at 8:30 a.m. with the total expected to rise to 214,000. Trump’s impeachment trial continues in Washington. German Chancellor Angela Merkel is among today’s speakers at Davos. There will be some interest in earnings today for American Airlines Group Inc. and Southwest Airlines Co. as investors will get a look at the hit the companies are taking from the grounding of Boeing Co.’s 737 Max aircraft. Intel Corp., Comcast Corp. and Union Pacific Corp. are among the other companies announcing results.