Opening Bell: U.S. Futures, Global Stocks, Oil, Yields Plunge On Virus Fears

• Steps by China to limit virus spread underscore risks

• Oil and yields trigger bearish technical signals

• The Shanghai Composite had its worst day on record

Key Events

Shares in Asia dropped this morning, U.S. futures, including for the S&P 500, Dow Jones and NASDAQ, languished and European stocks extended a selloff, as fears triggered by the coronavirus outbreak returned, notwithstanding steps taken by China to stop the spread of the sometimes lethal illness.

China’s move to stop movement in and out of Wuhan, where the pneumonia-like virus originated, hasn't served to fully allay investor concerns. Some see this as a headwind that, if it spreads, could undermine what many believed was finally a bottom to the global economic slowdown.

Oil and yields plunged.

Global Financial Affairs

S&P 500 futures have been fluctuating today; at time of writing they're marginally higher.

SPX Futures Daily

However, investors should watch the levels attained during the last five sessions. They might be getting ready to complete a bullish flag, with an upside breakout.

The STOXX Europe 600 Index dropped, pressured by mining companies. The possible spread of the virus also underscores the risk to retail shares and airline companies.

Earlier Thursday, China’s Shanghai Composite underperformed, (-2.75%), as investors desperately unwound positions at any price during the final trading day before the week-long Lunar New Year holiday. It was the worst selloff for the index since it was created 30 years ago.

Conversely, this morning, the most recent signal that a global economic recovery might be underway was a positive Australian employment report. The release pushed the AUD to outperform among the major currencies.

AUD Daily

Technically, the Aussie bounced off the bottom of a rising channel, moving back above what might still prove to be the neckline of a H&S, as the 200 DMA kept the Australian dollar at bay.

UST 10-Y Daily

Investors eagerly latched on to Treasurys, pushing yields, including for the U.S. 10-year note, down for the third straight day, to the lowest since Dec. 3, below the bottom of its rising channel since the Sept. 3 bottom.

USD/JPY Daily

The USD/JPY pair has been falling for the third day in a row, testing the support of highs since Nov 7.

Fear that the virus will impact economc growth exacerbated concerns of an oversupplied crude market. Additional oil market risks have also begun to surface.

Oil Daily

Technically, the price of WTI completed a bearish flag when it fell below the uptrend line since Oct. 3 and the 200 DMA.

Up Ahead

• Companies including Intel (NASDAQ:INTC), Procter & Gamble (NYSE:PG) and American Airlines Group (NASDAQ:AAL) report earnings today.
• The European Central Bank will release a policy decision later Thursday.
• The World Economic Forum, the annual gathering of global leaders in politics, business and culture, continues in Davos, Switzerland.

Market Moves

Stocks

• The Stoxx Europe 600 Index dipped 0.4%.
• Futures on the S&P 500 Index were little changed.
• Germany’s DAX dipped 0.5%.
• The Shanghai Composite Index sank 2.8%.
• The MSCI Asia Pacific Index decreased 0.7%.

Currencies

Bonds

• The yield on 10-year Treasuries fell three basis points to 1.74%.
• Germany’s 10-year yield dipped two basis points to -0.28%.
• Britain’s 10-year yield fell two basis points to 0.614%.
• Italy’s 10-year yield decreased six basis points to 1.287%.

Commodities