Concerns over the spread of the coronavirus caused the Chinese stock market to plunge more than 7% on Monday as the local markets re-opened following the Lunar New Year holiday. By mid-week, China’s major indices recovered about half of these losses as China’s central bank helped soften the blow by injecting approximately $57 billion of liquidity into the markets. While the coronavirus remains a headwind for financial markets, U.S. investors have largely brushed off these fears, with all major U.S. stock indices now trading in positive territory for the year. The recent rally in U.S. stocks can be largely attributed to strong corporate earnings and underlying economic fundamentals. For the first time since July, data from the Institute of Supply Management (ISM) showed U.S. manufacturing activity expanded in January. The ISM non-manufacturing index also increased by more than expected, citing increases in the business activity, and new orders components. Private sector employment in the ADP report increased by 291,000 last month, a welcomed sign ahead of Friday’s nonfarm payroll figures. Following a strong rally (decline) in interest rates to start the year, things have stabilized for the time being with the 2-year and 10-year treasury notes trading at 1.44% and 1.64% respectively mid-week.
Source: Morningstar Direct, CNBC, WSJ Market Data, GSAM, Bloomberg