An escalating death toll from China’s coronavirus was spooking investors on Thursday (30 January) with the FTSE 100 closing down 1.4% at 7,381.96.
After a turbulent start to the new decade in January with the coronavirus and the threat of an escalating conflict in the Middle East for the markets to contend with, investors will be hoping for a quieter February. The beginning of next week has a limited number of big economic announcements. Next Monday (3 February) there are manufacturing figures from the US and China, the latter might offer some indication of whether the country’s health crisis is having any early impact. Next Thursday (6 February) the new head of the European Central Bank Christine Lagarde is scheduled to speak before the European Parliament and this may offer some clues on the direction she intends to take monetary policy. Friday (7 February) sees the release of the influential US non-farm payrolls data (see Economic update).
The resources sector was in the spotlight this week amid the escalating coronavirus in China. The country is by far the biggest influence on global commodity markets, with its 1.4bn population and rapidly growing economy (by global standards) fuelling energy and base metal demand. Nearly two thirds of all iron ore exports go to China, while the country accounts for almost 50% of the world’s copper demand and around 14% of global oil consumption. Shares in major iron ore producers like BHP (BHP), Rio Tinto (RIO), Anglo American (AAL) and Ferrexpo (FXPO) have all come under pressure as the infection rate and death toll rises in mainland China. Copper producers Antofagasta (ANTO) and KAZ Minerals (KAZ) have also seen their shares struggle, while oil majors BP (BP.) and Royal Dutch Shell (RDSB) slipped, with Shell not helped by disappointing results on Thursday (30 January). The difficulty facing the sector and investors more generally is that it is very difficult to predict what will happen next and when and how the virus will be contained. A Chinese government economist suggests the health crisis will drive the country’s economic growth below 5% in the first quarter. More than one percentage point lower than previously expected.
The US Federal Reserve has just opted to keep interest rates on hold, in trying to determine when or if the central bank might cut rates, it is worth keeping an eye on the US jobs market, for which the key release is the non-farm payrolls data out next Friday (7 February).
Internationally-focused fund Premier Global Alpha Growth (GB00B2QXTP49) is under new management with Duncan Goodwin assuming control from 20 January 2020. He may look to rejig the portfolio with the fund consistently underperforming its benchmark.
4 February – Full year numbers from BP (BP.) have a low bar to clear to do better than those from rival Royal Dutch Shell (RDSB). Shell’s fourth quarter profit nearly halved year-on-year thanks to weaker oil and gas prices and poor performance from its refining and petrochemicals business. Shareholders BP can fare better and will be watching closely for guidance on the dividend as new CEO Bernard Looney gets ready to replace long-serving boss Bob Dudley on 5 February.
5 February – Investors will be looking for first half results from Barratt Developments (BDEV) to chime with recent industry surveys which suggest the housing market has picked up since the decisive result in the December UK General Election. The Nationwide House Price index gained 1.9% year-on-year in January. The company may offer some commentary on how it is shaping up ahead of the key spring selling season for new homes.
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