Market Review

Global Markets Weekly Update

Review the performance of global stock and bond markets over the past week, along with relevant insights from T. Rowe Price economists and investment professionals.



Coronavirus fears send stock prices and bond yields lower

Stocks closed lower for the holiday-shortened week, as more quarterly earnings reports rolled in and investors worried about the coronavirus outbreak in China (see below). The large-cap benchmarks and the technology-heavy Nasdaq Composite Index outperformed and touched new record highs before falling back sharply on Friday. Markets were closed Monday in observance of Martin Luther King Jr. Day.

Utilities shares outperformed, helped by a steep decline in longer-term bond yields, which heightens the appeal of utilities’ relatively attractive dividends. Energy shares lagged as oil prices continued the decline they began on January 6. Expectations for a drop-off in global tourism in the wake of the coronavirus appeared to play a role in driving concerns over oil demand. Wynn Resorts and Las Vegas Sands were also particularly weak given the prospect of a decline in visits to their casinos in Macau.

News of first coronavirus victim in U.S. unnerves investors

The outbreak in China dominated sentiment as the U.S. trading week began on Tuesday, according to T. Rowe Price traders, with tourism, airline, and gaming stocks bearing the brunt of the selling. News of a confirmed case in the Seattle area appeared to particularly worry markets. Renewed trade fears may also have weighed on sentiment after President Donald Trump told The Wall Street Journal that he was prepared to implement tariffs on European auto imports.

Some favorable economic reports may have helped calm investors’ fears at midweek. On Wednesday, news arrived that existing home sales in December had risen more than expected and reached their highest level since February 2018. The number of previously owned homes for sale also reached a record low, which bodes well for future construction activity, according to T. Rowe Price Chief U.S. Economist Alan Levenson. On Thursday, the Labor Department reported that weekly jobless claims rose a bit, but less than anticipated. Good news on European manufacturing (see below) appeared to help stocks off to a good start on Friday morning before reports of a second U.S. case of coronavirus—as well as the first coronavirus death of a young, apparently healthy victim in China—appeared to derail the rally.

Treasury yields hit three-month low as investors seek a safe haven

Fears over the coronavirus outbreak clearly eclipsed economic data in the fixed income markets, as investors sought the safe haven of Treasuries. The yield on the benchmark 10-year Treasury note plunged to its lowest level in about three months on Friday. (Bond prices and yields move in opposite directions.)

Within the investment-grade corporate bond segment, energy issues underperformed for much of the week, partly due to a decline in natural gas prices. In credit-specific news, Boeing traded lower amid headlines that the Federal Aviation Administration is unlikely to provide approval for the 737 MAX aircraft to return to service until mid-2020, which is roughly three months later than originally anticipated.

The high yield market was mostly focused on strong new issuance, according to the firm’s traders. High yield energy bonds were also weak due to the decline in natural gas and oil prices, while many issuers continued to struggle with somewhat tepid demand for new deals in the heavily weighted sector. Overall, however, investors appeared ready to put money to work in the high yield primary market.

U.S. Stocks1
Index Friday's Close Week's Change % Change YTD





S&P 500




Nasdaq Composite




S&P MidCap 400




Russell 2000




This chart is for illustrative purposes only and does not represent the performance of any specific security. Past performance cannot guarantee future results.
Source of data: Reuters, obtained through Yahoo! Finance and Bloomberg. Closing data as of 4 p.m. ET. The Dow Jones Industrial Average, the Standard & Poor’s 500 Stock Index of blue chip stocks, the Standard & Poor’s MidCap 400 Index, and the Russell 2000 Index are unmanaged indexes representing various segments of the U.S. equity markets by market capitalization. The Nasdaq Composite is an unmanaged index representing the companies traded on the Nasdaq stock exchange and the National Market System. Frank Russell Company (Russell) is the source and owner of the Russell index data contained or reflected in these materials and all trademarks and copyrights related thereto. Russell® is a registered trademark of Russell. Russell is not responsible for the formatting or configuration of these materials or for any inaccuracy in T. Rowe Price Associates’ presentation thereof.



Stocks end little changed

European stocks finished little changed, recovering from earlier weakness after economic data showed the German economy might be picking up steam, and the World Health Organization stopped short of declaring the coronavirus outbreak in China a global health emergency. The pan-European STOXX Europe 600 Index ended the week up 0.08%, while Germany’s DAX Index rose 2.1%. However, the UK’s FTSE 100 Index fell 0.55%.

UK changes tack on EU ties

UK Chancellor of the Exchequer Sajid Javid said in an interview with the Financial Times (FT) that the UK would not seek regulatory alignment with European Union (EU) rules and intends to be out of the single market and customs union by the end of the year. He said the government would not support big manufacturers that favor alignment with EU rules. Javid’s comments represent a shift in the UK’s negotiating stance. But the change in stance caused dismay in the UK auto industry and in Brussels, where officials were quoted by the FT as saying a divergence from EU rules would be economically damaging. Javid then sought to reassure businesses that there would be no wholesale dumping of EU regulations. He also said that the government would always protect British business interests and maintain high standards.

U.S. officials gave notice at the World Economic Forum meeting at Davos, Switzerland, that they now plan to tackle trade relations with the European Union. President Trump again threatened to impose “very high tariffs” on European cars if the two sides cannot reach a trade agreement soon. The White House quoted Trump as saying he expects “tangible progress” on a trade agreement in the near future. Separately, U.S. Treasury Secretary Steven Mnuchin said the administration expects to conclude a U.S.‑UK trade deal this year.

German, French PMIs show positive start to 2020

The French and German economies, the largest in the eurozone, posted a positive start to the year, with combined output growth at a five-month high in January. In Germany, overall output rose for the second successive month, with new orders increasing for the first time since June 2019. A stronger expansion in services activity and a less marked decline in manufacturing output contributed to the improving picture. The French economy continued its solid performance, as both output and new orders rose for the 10th month running. The rest of the euro area showed signs of weakness. Output growth slowed to a six-and-a-half year low, signaling near stagnation in business activity outside Germany and France.

UK business activity expanded in January for the first time in five months, rising above the 50.0 level that separates growth from contraction, an IHS Markit survey of purchasing managers showed. Manufacturing output was still below the 50.0 level but stabilized compared with the end of 2019, IHS Markit said. T. Rowe Price International Economist Tomasz Wieladek said a rates decision will be very finely balanced, although, in his view, there will be a cut. Those who favor one will argue that the economy remains fundamentally weak, while the more hawkish members will point to the purchasing managers’ index (PMI) data as evidence of a rebound.


Japanese stocks declined for the week. The Nikkei 225 Stock Average fell 214 points or -0.9% and closed at 23,827.18, up 0.7% for the year to date. The large-cap TOPIX Index and the TOPIX Small Index also edged lower for the week. The yen was modestly stronger and closed at ¥109.50 per U.S. dollar.

Japanese exports decline for 13 consecutive months

Japan’s exports fell a more-than-expected 6.3% in December compared with a year earlier, extending the longest stretch of monthly contractions (13) since 2016. The fall-off in exports, as reported by the Ministry of Finance on Thursday, was larger than most economists had forecast. November’s export data were revised lower as the Japanese economy continued to suffer from the global slowdown caused by the U.S.-China trade war. Although the “phase one” trade deal has been signed, most economy watchers believe the decline in exports will persist for a few more months. Thursday’s release showed that Japan's exports in calendar year 2019 fell 5.6% to ¥76.9 trillion (approximately $700 billion), while imports fell 5.0% to ¥78.6 trillion, leaving a small deficit.

As expected, BoJ stays the course

The Bank of Japan (BoJ) left its interest rate and asset purchase targets unchanged at the central bank meeting that ended on Tuesday. Although economic growth in the fourth quarter of 2019 is expected to show a contraction, due to natural disasters and the negative impact on consumption from the October 1 sales tax hike, most economists believe that the decline in overseas demand has bottomed. Looking ahead, the central bankers exuded a more positive outlook for Japan’s economy and raised their economic growth projection for fiscal 2020 (which begins April 1) to 0.9%, up from October’s 0.7% forecast. Most economists believe that there will be no monetary policy adjustments from the BoJ, the European Central Bank, or the Federal Reserve in the near term.


Stocks suffer biggest one-day decline in eight months on coronavirus fears

The sudden appearance of a new coronavirus in Wuhan, a city of 11 million people in central China, shook Chinese markets. Reminiscent of the SARS outbreak in 2003, the Shanghai Composite Index suffered its biggest one-day fall (2.8%) in over eight months on January 23, the last day of trading before the Chinese New Year (CNY) lunar holiday. From Monday’s close through Thursday’s close, the Shanghai Composite Index lost 3.8%, and the CSI 300 large-cap index declined by 4.3%.

When compared with the SARS (severe acute respiratory syndrome) outbreak in 2003, there are obvious similarities but also some key differences. Today's Chinese economy is more consumer-oriented and, arguably, more vulnerable. Since China's economic growth slowed significantly before the Wuhan coronavirus outbreak, there is growing market speculation about a possible short-term stimulus. The biggest economic casualties are likely to be retail sales (online sales could benefit), restaurants, and airlines and travel, as consumers take steps to lower the chances of infection by staying home more.

Notwithstanding prompt action by Chinese authorities—including the lockdown of Wuhan and neighboring cities over the CNY holiday, halting public transport, and checking private cars—the disease has spread quickly, with cases reported in 23 provinces, Hong Kong, Macau, and six other countries. The big holiday migration in China typically gets under way well before the official start of the CNY. The number of reported cases was 800 as of January 24, with 25 deaths, compared with only 77 cases on January 21.

Macro impact may follow the SARS playbook

Based on the example provided by SARS, even if the short-term impact of the Wuhan coronavirus on consumer expenditure is significant, over a longer horizon, it may nevertheless appear relatively minor, with little impact on underlying trends.

Other Key Markets

Botoucharov: New prime minister may be a positive for economy

The Russian stock market, as measured by the Russian Trading System (RTS) Index, returned -2.3%. Shares weakened as oil prices fell to a seven-week low—Russia is a major producer—and as general sentiment toward emerging markets soured amid concerns about the coronavirus outbreak in China.

During the week, Russia’s new prime minister, Mikhail Mishustin, unveiled his new cabinet. Based on Mishustin’s choices for various ministries, T. Rowe Price Sovereign Analyst Peter Botoucharov believes that there are two main policy takeaways:

First, from a fiscal standpoint, Russia—which has, in recent years, focused primarily on maintaining financial and macroeconomic stability, including trade and budget surpluses, amid sharply lower oil prices and punitive U.S. sanctions—is shifting its objectives toward a balance of stability and growth. Second, with the finance, foreign, and energy ministers returning to their previous posts under former prime minister Dmitry Medvedev, the government is signaling that it wants stability and continuity in these three key policy areas.

Botoucharov believes that the Mishustin government is a longer-term positive for the economy—though this would depend on the speed and the success of implementing fiscal expansion and the timely start of large infrastructure projects. He also believes that, on balance, President Vladimir Putin’s plan to redistribute institutional power from the president to Parliament and regional governors is a long-term positive for the country’s stability.

Brazilian shares rise on hopes for OPEC cooperation

Shares in Brazil, as measured by the Bovespa Index, returned about -0.1%. The index did touch a new all-time high during the week, however.

Equities held up well versus other emerging markets, thanks in part to news from Energy Minister Bento Albuquerque that the country’s leaders—as reported by Reuters—would meet with Saudi Arabian officials later this year to discuss the possibility of cooperating with, or perhaps even joining, the Organization of Petroleum Exporting Countries (OPEC). Brazil has been increasing its energy production since President Jair Bolsonaro took office at the beginning of 2019. In fact, according to Brazil’s National Petroleum Agency, the country produced more than 1 billion barrels of oil in 2019—a new annual record.

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