U.S. Futures Climb With Stocks on China Tariff Cut: Markets Wrap
(Bloomberg) -- U.S. equity futures rose with stocks on Thursday as China’s plans for tariff cuts on American imports added to optimism the global economy will weather the hit from the coronavirus. Treasuries fluctuated.
Contracts on the main American equity benchmarks all pointed to a fourth day of gains after China said it will lower levies on $75 billion of U.S. goods next week, likely satisfying part of the interim trade deal. Twitter Inc. rose about 3% in pre-market trading after topping analysts’ projections for fourth-quarter revenue.
Strong results also helped power the Stoxx Europe 600 Index to a record high. ArcelorMittal SA jumped the most since 2016 after expressing optimism on the outlook for steel demand this year, and Societe Generale SA rose after pledging to boost shareholder returns. Asian benchmarks advanced, with Japan’s rising more than 2% as Toyota Motor Corp. reported a higher-than-expected quarterly profit.
The latest trade developments have further boosted investor optimism after several reports on possible vaccines for the virus on Wednesday, though the World Health Organization later said there are no proven therapeutics. While some warn of complacency as a gauge of global stocks inches toward a record, others flag support from policy makers, and recent indicators showing the trajectory of growth was solid before the virus struck.
“Companies are going to continue to struggle in the short term” with disruptions and forgone business due to the virus, said Joe Zidle, chief investment strategist at Blackstone Group Inc. But China’s moves in recent days to reopen markets and inject stimulus “gave global investors a degree of confidence that the Chinese policy makers had at least taken the worst-case scenario off the table,” he said.
Elsewhere, a gauge of European credit risk hit its lowest since 2007, while the euro held steady even as data showed German factory orders fell at their fastest pace in more than a decade.
Here are some key events coming up:
German industrial production is due on Friday.The U.S. employment report for January is set for Friday release.Australia’s central bank chief speaks and takes questions at a parliamentary committee.
And these are the main moves in markets:
Stocks
Futures on the S&P 500 Index increased 0.4% as of 7:21 a.m. New York time.The Stoxx Europe 600 Index climbed 0.4%.The MSCI Asia Pacific Index gained 1.8%.The MSCI Emerging Market Index gained 1.4%.
Currencies
The Bloomberg Dollar Spot Index was little changed.The euro was little changed at $1.1002.The British pound sank 0.3% to $1.2964.The onshore yuan rose 0.1% to 6.969 per dollar.The Japanese yen declined 0.1% to 109.90 per dollar.
Bonds
The yield on 10-year Treasuries dipped less than one basis point to 1.65%.The yield on two-year Treasuries declined less than one basis point to 1.44%.Germany’s 10-year yield climbed less than one basis point to -0.36%.Britain’s 10-year yield fell one basis point to 0.604%.Japan’s 10-year yield gained two basis points to -0.017%.
Commodities
West Texas Intermediate crude gained 1.1% to $51.31 a barrel.Brent crude climbed 0.5% to $55.56 a barrel.Gold increased 0.5% to $1,564.47 an ounce.
--With assistance from Christopher Anstey, Joanna Ossinger and Adam Haigh.
To contact the reporter on this story: Yakob Peterseil in London at ypeterseil@bloomberg.net
To contact the editor responsible for this story: Sam Potter at spotter33@bloomberg.net
For more articles like this, please visit us at bloomberg.com
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Yum Brands on Thursday reported quarterly earnings that fell short of analysts' expectations as Pizza Hut's struggles continue.
Shares of the company slid more than 2% in premarket trading.
Here's what the company reported, compared with what Wall Street was expecting based on a survey of analysts by Refinitiv:
Earnings per share: $1, adjusted, vs. $1.13 expected
Revenue: $1.69 billion, vs. $1.66 billion expected
Same-store sales: 2%, vs. 2.3% expected
Taco Bell's parent company reported fiscal fourth-quarter net income of $488 million, or $1.58 per share, up from $334 million, or $1.04 per share, a year earlier.
The company's minority stake in Grubhub trimmed earnings per share by 5 cents. Grubhub struggled in 2019 as fierce competition with DoorDash, Uber Eats and Postmates put pressure on its business.
Excluding refranchising gains and other items, Yum earned $1 per share, missing the $1.13 per share expected by analysts surveyed by Refinitiv.
Net salesrose 9% to $1.69 billion, topping expectations of $1.66 billion. The company reported same-store sales growth across KFC, Pizza Hut and Taco Bell of 2%. Yum announced in January that it would be adding a fourth brand to its portfolio: Habit Restaurants, which owns the Habit Burger Grill.
Pizza Hut was once again the laggard during the quarter. Same-store sales at the pizza chain fell 2%, a steeper drop than expected by analysts.
KFC's same-store sales increased by 3%, and Taco Bell's grew by 4% in the fourth quarter.
On Wednesday, Yum China, which was spun off in 2016, warned that the Wuhan coronavirus will likely "materially affect" its 2020 sales and profits. The Chinese licensee of KFC and Pizza Hut said it could report an operating loss in the first quarter. China is KFC's largest market by systemwide sales.
Yum China has temporarily closed about a third of its restaurants in the country, and those still open have seen sales drop dramatically. Same-store sales during the Lunar New Year holiday fell by 40% to 50% from a year ago. In response, Yum China has rolled out "contactless delivery" so customers do not have to engage with employees to pick up their food from a restaurant.
The move comes as China is grappling with the escalating coronavirus outbreak. The disease has killed 565 people, mostly in China, and infected more than 28,000 people in over 25 countries and territories.
The reduction affects US goods that China imposed tariffs on last September. Starting next week, China will cut the additional 10% tariff rate it enacted back then on some goods to 5%. Other goods that were taxed an extra 5% will now be levied 2.5%, according to a statement from China's State Council Tariff Commission.
The commission added that other tariffs on US goods will be maintained while it continues to work on exemptions.
"China hopes that both sides will abide by bilateral agreements and make an effort to implement relevant provisions so that we can boost market confidence, promote bilateral trade relations and global economic growth," the statement said.
"Nevertheless, the announcement may help boost market sentiment, especially at a time when China is battling with the economic impact of the coronavirus outbreak," he said.
Wu and other experts have warned that the coronavirus outbreak could dent China's economic growth this year and have knock-on effects for the global economy.
When the outbreak hit, Beijing took the extraordinary step of placing major cities on lockdown in order to contain it. The government also extended the Lunar New Year holiday, effectively bringing factories around the country to a standstill as workers have been ordered to stay home. Millions of people have pulled back on consumption, as they hunker down indoors and avoid public spaces.
Washington officials earlier this week said the outbreak could delay exports of US goods to China. Last month, Beijing had agreed to buy an additional $200 billion worth of products from the United States as part of a "phase one" trade deal.
"It is true the 'phase one' trade deal, the export boom from that trade deal, will take longer because of the Chinese virus," Larry Kudlow, US President Donald Trump's chief economic adviser, said in an interview with Fox Business on Tuesday.
Agricultural goods such as soybeans, pork, cotton and wheat had accounted for a big chunk of the new purchases.
On Wednesday, US Secretary of Agriculture Sonny Perdue said the United States should be patient with China's ability to meet those trade pledges, given the coronavirus outbreak.
"If they're really trying and it really just blows the economy out of the water, then we would have to be understanding of that," Perdue said, according to Reuters.
Oxford Economics earlier this week cut its GDP forecast for China, saying that even with a rebound in the second quarter of this year, "we now forecast 5.4% growth for 2020, compared with 6% previously."
The move comes as China is grappling with the escalating coronavirus outbreak. The disease has killed 565 people, mostly in China, and infected more than 28,000 people in over 25 countries and territories.
The reduction affects US goods that China imposed tariffs on last September. Starting next week, China will cut the additional 10% tariff rate it enacted back then on some goods to 5%. Other goods that were taxed an extra 5% will now be levied 2.5%, according to a statement from China's State Council Tariff Commission.
The commission added that other tariffs on US goods will be maintained while it continues to work on exemptions.
"China hopes that both sides will abide by bilateral agreements and make an effort to implement relevant provisions so that we can boost market confidence, promote bilateral trade relations and global economic growth," the statement said.
"Nevertheless, the announcement may help boost market sentiment, especially at a time when China is battling with the economic impact of the coronavirus outbreak," he said.
Wu and other experts have warned that the coronavirus outbreak could dent China's economic growth this year and have knock-on effects for the global economy.
When the outbreak hit, Beijing took the extraordinary step of placing major cities on lockdown in order to contain it. The government also extended the Lunar New Year holiday, effectively bringing factories around the country to a standstill as workers have been ordered to stay home. Millions of people have pulled back on consumption, as they hunker down indoors and avoid public spaces.
Washington officials earlier this week said the outbreak could delay exports of US goods to China. Last month, Beijing had agreed to buy an additional $200 billion worth of products from the United States as part of a "phase one" trade deal.
"It is true the 'phase one' trade deal, the export boom from that trade deal, will take longer because of the Chinese virus," Larry Kudlow, US President Donald Trump's chief economic adviser, said in an interview with Fox Business on Tuesday.
Agricultural goods such as soybeans, pork, cotton and wheat had accounted for a big chunk of the new purchases.
On Wednesday, US Secretary of Agriculture Sonny Perdue said the United States should be patient with China's ability to meet those trade pledges, given the coronavirus outbreak.
"If they're really trying and it really just blows the economy out of the water, then we would have to be understanding of that," Perdue said, according to Reuters.
Oxford Economics earlier this week cut its GDP forecast for China, saying that even with a rebound in the second quarter of this year, "we now forecast 5.4% growth for 2020, compared with 6% previously."
The World Dream cruise liner was denied port call in Taiwan and was forced to return to Hong Kong for an early arrival Wednesday.
Photo:
miguel candela/Shutterstock
Two major U.S. airlines suspended flights to Hong Kong and 10 people on a cruise ship under quarantine in Japan tested positive for the new coronavirus, as more Chinese cities imposed restrictions on movement meant to help contain the fast-spreading pathogen that has killed nearly 500 people.
United Airlines Holdings Inc.
and
American Airlines Group Inc.
said they were halting flights into and out of Hong Kong until Feb. 20, citing a lack of demand. Both airlines and several other global carriers had previously halted service to the Chinese mainland.
Hong Kong, which earlier reported its first death from the virus, said Wednesday it would impose a 14-day quarantine on all people arriving from the mainland—an escalation from a previous rule barring only people who were residents of or had recently been to the Chinese province worst-hit by the virus. The death in Hong Kong was the second outside the mainland, where by the end of Tuesday the number of fatalities from the virus had reached 490. The number of confirmed cases on the mainland exceeded 24,000 since the virus originated in December in the central Chinese city of Wuhan.
The Latest on the Coronavirus
American Airlines and United suspended flights to Hong Kong
10 people on a quarantined cruise ship in Japan tested positive
The death toll neared 500, with more than 24,000 confirmed cases
Hong Kong will quarantine all travelers from mainland China for 14 days
As of Wednesday afternoon, Hong Kong authorities had confirmed nearly two dozen cases. The city was hit hard in 2002 and 2003 by an outbreak of severe acute respiratory syndrome. Of the nearly 800 deaths from SARS, 299 were in Hong Kong.
United Airlines aircraft parked at the San Francisco International Airport as United said it would pause all China flights.
Photo:
Yichuan Cao/Zuma Press
The new policy applies to all travelers from mainland China—including Hong Kong residents, mainland Chinese nationals and foreign visitors—and will take effect Saturday night.
Chief Executive
Carrie Lam
said the special Chinese territory would immediately shut down two of its cruise terminals after a cruise ship that had previously carried eight people confirmed to be infected with the coronavirus docked in the city on Wednesday morning. All passengers and crew members are blocked from disembarking until a health check was completed, a Hong Kong official said.
Coronaviruses: From Animals to Humans
Researchers aren't sure how the novel coronavirus first infected people in China, but the viruses that cause SARS and MERS, which originated in bats, provide clues.
2
1
Proteins on the outer shell of the virus allow it to latch onto cells in the host’s respiratory tract. The proteins’ shapes are determined by the virus’s genes.
To infect new hosts, the virus’s genes undergo mutations that alter its surface proteins, allowing them to latch onto the cells of new species.
Bat respiratory tract
Human respiratory tract
Cell
Virus
Gene
Protein
Mutation
3
In the case of SARS, the virus jumped from bats to civet cats before gaining the ability to infect humans. In the case of MERS, camels served as the intermediate host.
Original host
Intermediate host
Human
4
Coronaviruses can also jump directly to humans, without mutating or passing through an intermediate species.
5
Researchers aren't sure from what animal the novel coronavirus originated or whether it passed through an intermediate species before infecting humans.
2
1
Proteins on the outer shell of the virus allow it to latch onto cells in the host’s respiratory tract. The proteins’ shapes are determined by the virus’s genes.
To infect new hosts, the virus’s genes undergo mutations that alter its surface proteins, allowing them to latch onto the cells of new species.
Bat respiratory tract
Human respiratory tract
Cell
Virus
Gene
Protein
Mutation
3
In the case of SARS, the virus jumped from bats to civet cats before gaining the ability to infect humans. In the case of MERS, camels served as the intermediate host.
Original host
Intermediate host
Human
4
Coronaviruses can also jump directly to humans, without mutating or passing through an intermediate species.
5
Researchers aren't sure from what animal the novel coronavirus originated or whether it passed through an intermediate species before infecting humans.
2
1
Proteins on the outer shell of the virus allow it to latch onto cells in the host’s respiratory tract. The proteins’ shapes are determined by the virus’s genes.
To infect new hosts, the virus’s genes undergo mutations that alter its surface proteins, allowing them to latch onto the cells of new species.
Bat respiratory tract
Human respiratory tract
Cell
Virus
Gene
Protein
Mutation
3
In the case of SARS, the virus jumped from bats to civet cats before gaining the ability to infect humans. In the case of MERS, camels served as the intermediate host.
Original host
Intermediate host
Human
4
Coronaviruses can also jump directly to humans, without mutating or passing through an intermediate species.
5
Researchers aren't sure from what animal the novel coronavirus originated or whether it passed through an intermediate species before infecting humans.
1
Proteins on the outer shell of the virus allow it to latch onto cells in the host’s respiratory tract. The proteins’ shapes are determined by the virus’s genes.
Bat respiratory tract
Cell
Virus
Gene
Protein
2
To infect new hosts, the virus’s genes undergo mutations that alter its surface proteins, allowing them to latch onto the cells of new species.
Mutation
Human respiratory tract
3
In the case of SARS, the virus jumped from bats to civet cats before gaining the ability to infect humans. In the case of MERS, camels served as the intermediate host.
Original host
Intermediate host
4
Human
4
Coronaviruses can also jump directly to humans, without mutating or passing through an intermediate species.
5
Researchers aren't sure from what animal the novel coronavirus originated or whether it passed through an intermediate species before infecting humans.
Source: Timothy Sheahan, University of North Carolina
Alberto Cervantes and Josh Ulick /THE WALL STREET JOURNAL
Earlier this week, Hong Kong had shut down four checkpoints with China amid a five-day strike by the city’s hospital workers who are demanding a full border closure.The cruise-terminal closures leave the city with three open checkpoints. Mrs. Lam said a full closure wouldn’t be practical.
Cathay Pacific Airways Ltd.,
the city’s flagship carrier, asked all its employees to take three weeks of optional unpaid leave from March 1 to June 30 because of the virus and a drop in demand, according to a representative of the airline. Previously, the airline, already suffering from reduced travel to Hong Kong because of months of protests, said it was reducing its capacity by 30%.
In Yokohama, Japan, just south of Tokyo, nine passengers and one crew member from the cruise ship Diamond Princess were taken to hospitals after testing positive for the virus, and all 3,700 people still on board are likely to be kept there for two weeks, Japan’s health minister said Wednesday. The ship was put under quarantine after an 80-year-old man who had disembarked in Hong Kong tested positive.
In the U.S., two planes carrying hundreds of Americans evacuating Wuhan landed at the Travis Air Force Base in Fairfield, Calif., early Wednesday morning. One plane will stay at the Air Force base, while the second will refuel and fly to Marine Corps Air Station Miramar in San Diego. The continued evacuations come a week after more than 200 Americans returned to the U.S. in a State Department-led effort.
Throughout their journey to the U.S., passengers were screened for symptoms of the highly contagious virus. The evacuees will undergo a 14-day quarantine at both of these sites, officials said, led by the U.S. Department of Health and Human Services and the Centers for Disease Prevention and Control.
At Travis Air Force Base, evacuees will stay at the on-site lodging facility Westwind Inn. On Tuesday, officials at the Marine Corps Air Station Miramar handed out pamphlets and held information sessions for the community ahead of the arrival of evacuees, according to social media posts.
At the center of the crisis in Wuhan, designated hospitals started taking only severe or critical patients confirmed to have the virus on Wednesday, according to an agency set up to deal with the outbreak. The medical system in Hubei province has been overwhelmed by the virus, and front-line staff have been forced to turn patients away as authorities race to build new hospitals.
Hu Lishan, a local Communist Party official, said at a Wednesday night press conference that many patients confirmed to have the coronavirus hadn’t been admitted to those designated hospitals because of a lack of available beds. Stressing the severity of the situation, he said the patients were “forming a dammed lake, which is very distressing and painful.”
Jiang Rongmeng,
a member of the National Health Commission’s team studying the virus, said inadequate medical resources in Wuhan were contributing to a higher mortality rate there.
“The medical resources in Wuhan, especially the ICU team, are not enough to deal with this severe treatment,” he said in a Tuesday interview with state broadcaster China Central Television. The death rate from the virus in the city is 4.9%, more than twice the nationwide 2.1%, according to the health commission.
On Wednesday, Wuhan Children’s Hospital said it had two cases of the coronavirus being transmitted in the womb from mother to baby, according to the Communist Party-run People’s Daily. The younger of the infected babies was 30 hours old.
In a Wednesday Foreign Ministry news briefing—held over the Chinese messaging app
WeChat
instead of at the Foreign Ministry because of the outbreak—spokeswoman Hua Chunying said the U.S. would dispatch experts to join a China-World Health Organization joint group. A batch of supplies sent by American businesses and institutions had arrived in Wuhan on Tuesday, she added. China has previously singled out the U.S. for imposing what it called excessive travel restrictions since the outbreak began.
Cities throughout China are putting increasingly severe restrictions on residents. Zhumadian, a city in Henan province—which borders the outbreak-stricken province of Hubei—is allowing one person per household to leave every five days to buy supplies.
At least a half-dozen Chinese cities, including the tech hub of Hangzhou, near Shanghai, have imposed similar regulations, though typically allowing shopping every other day. Wuhan, Hubei’s capital, has been under lockdown for two weeks.
In Beijing, catering services were prohibited from organizing and hosting group gatherings, according to a notice issued by the local government.
The government of Taiwan joined counterparts world-wide in tightening its borders to Chinese citizens: Those living in the mainland will be barred entry starting Thursday, Taiwan’s Centers for Disease Control said. Beijing largely bars its nationals from traveling to the self-ruling island.
The Taipei government, which had previously said it would refuse entry starting Friday to foreigners who had traveled to mainland China in the past two weeks, said those who had traveled to Hong Kong or Macau will have to self-quarantine.
Related Video
Challenges for travel and leisure stocks, slower economic growth and a weaker Chinese yuan are among the new market implications investors are dealing with as the new coronavirus spreads rapidly. Photo: Bloomberg/Qilai Shen
The world of finance took a hit from the coronavirus as Credit Suisse Group AG canceled its signature Asian Investor Conference in Hong Kong, one of the city’s biggest financial-industry gatherings, due to health and safety risks, a spokeswoman said Wednesday. It marked the first time that the conference, scheduled for March each year, has been canceled since it began in 1998. The conference attracted more than 2,000 investors from around the world last year.
—Jennifer Calfas, Bingyan Wang,
Jing Yang
and Frances Yoon contributed to this article.
