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.



Virus fears pull stocks back from record highs

Stocks ended lower for the holiday-shortened week as worries grew about the impact of the COVID-19 outbreak on the global economy. The S&P 500 Index and the technology-heavy Nasdaq Composite Index reached record highs on Wednesday before falling back, but the smaller-cap benchmarks held up best for the week. Technology stocks were among the worst performers in the S&P 500, weighed down by worries over disrupted supply chains in Asia. Communication services shares were also weak following a sharp earnings-related drop in ViacomCBS, while materials shares outperformed, helped by a rise in gold prices. U.S. markets were closed Monday in observance of Presidents’ Day.

Worries that Apple is “tip of the iceberg” for COVID-19 disruption

Evidence early in the week indicated that the COVID-19 outbreak was having a ripple effect throughout the global economy, even if the large majority of cases remained contained in China. Stocks fell as trading began Tuesday after Apple revealed that it would miss sales forecasts while the company was unsure of the extent of supply and demand shortfalls due to the new coronavirus. After the close of trading, auto parts company Aptiv also warned that the outbreak would weigh on its revenue and operating income more than anticipated. According to T. Rowe Price traders, investors appeared to worry that this was the “tip of the iceberg” in coming earnings downgrades.

Stocks regained some momentum on Wednesday, following reports of a sharp drop in new virus infections in China, along with additional stimulus measures by the Chinese government (see below). An alarming rise in infections at Beijing hospitals on Thursday may have helped send stocks back lower, however. On Friday, news of a jump in infections in South Korea and outbreaks in several Chinese prisons seemed to further dampen sentiment. Investors also appeared concerned by the Chinese government’s shifting methods of tallying new cases.

PMI report signals first overall contraction in business activity since 2013

Friday also brought some of the first evidence of a slowdown in the U.S. economy as result of the COVID-19 impact. IHS Markit’s flash composite purchasing managers’ index (PMI) for February fell sharply into contraction territory, indicating the first decline in U.S. private sector activity since 2013. The data may have been especially discouraging given positive signals from data earlier in the week. Regional manufacturing gauges surprised on the upside, and January building permits reached another 13-year high.

Virus and economic worries push longer-term yields to five-month lows

Virus fears and Friday’s PMI report appeared to foster a renewed flight to the perceived safe haven of the U.S. Treasury market. The yield on the benchmark 10-year Treasury note hit a new five-month low, while the yield on the 30-year Treasury bond hit the lowest level on record (1.89%). (Bond prices and yields move in opposite directions.) The broad municipal market strengthened through much of the week, propelled by supply and demand imbalances and the U.S. rates rally but could not keep pace with Treasuries. The largest deal of the week—$1.04 billion of Washington, D.C., income tax-secured revenue bonds and refunding bonds—drew strong demand.

The investment-grade corporate bond market saw robust issuance despite the short trading week. T. Rowe Price traders reported balanced buying and selling activity, and most new deals were well received. Credit spreads marginally widened across most market segments. The firm’s traders also observed that high yield bond investors continued to look for opportunities to spend down elevated cash balances, but sellers were not very active, with most of the trading activity focused on companies that reported earnings and new issues. In credit-specific news, Kraft Heinz was scheduled to enter the high yield market at the end of the month following its recent downgrade by S&P Global Ratings.

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.



European shares ended little changed near record highs, clawing back losses as a faster-than-expected bounce in business activity helped ease concerns around the impact of the COVID-19 coronavirus on regional economic growth. The pan-European STOXX Europe 600 Index ended the week almost flat. Germany’s Xetra DAX Index slipped 0.59%, and France’s CAC-40 Index declined 0.23%, while the UK’s FTSE 100 Index rose 0.20%.

Eurozone PMI better than expected

The IHS Markit Eurozone Composite PMI climbed to 51.6 in February from 51.3 in January, largely due to an increase in the services component. Readings above 50 signal growth. Despite evidence of supply disruptions caused by COVID-19, demand remained strong, with the new business index still above 50. The manufacturing PMI was below the break-even level but continued to rise, reaching 49.1 from 47.9 in January, the best reading in a year and comfortably ahead of forecasts. The data are consistent with gross domestic product (GDP) growth of 0.2%, IHS Markit’s Chief Business Economist Chris Williamson said. In the UK, the composite PMI held at 53.3, the highest level since September 2018. While services eased, manufacturing unexpectedly picked up to 51.9, a 10-month high, from 50.0 in January, despite shortages of components from China due to the coronavirus outbreak.

UK inflation hits six-month high

UK consumer prices rose for the first time in six months in January, accelerating to an annual rate of 1.8% versus 1.3% in December. The figure matched the consensus estimate of economists’ forecasts in a FactSet survey but was just below the Bank of England’s 2% inflation target. An official statistician said the increase was largely the result of higher gasoline prices and airfares. In January, the central bank said that it expected inflation to undershoot its target through 2020 and reach a low of about 1.2% in the third quarter.

UK jobs market still robust, but wage growth slows

The UK jobs market remained resilient in the final quarter of 2019 despite a stagnating economy. Official data showed that 180,000 new jobs were created compared with the previous quarter, exceeding the 145,000 new jobs forecast by economists in a Reuters survey. The employment rate, which is the share of working-age people in work, rose to 76.5%, the highest level since records began in 1971; the unemployment rate was unchanged at a near-record low of 3.8%. However, wage growth dipped to 2.9%, the slowest rate in more than a year. Labor productivity shrank 0.5%, remaining much slower than before the economic downturn of 2008–2009. The indicator has contracted for three of the past five quarters.


The Nikkei 225 Stock Average declined 1.27%, leaving it in negative territory for the year to date. Despite its usual role as a safe haven currency in times of market stress and geopolitical uncertainty, the yen fell sharply against the greenback, ending the week at roughly 111.6 to the U.S. dollar.

Japan’s GDP contracts more than expected

On Monday, the Cabinet Office announced that Japan’s GDP contracted 6.3% on an annualized basis in the final quarter of 2019. The quarter-over-quarter decline in this preliminary estimate was significantly steeper than the 3.7% shortfall most economists had expected and the worst result in more than five years. The main reasons cited were the October 1 consumption tax increase and a super typhoon, both of which crimped economic activity and dampened consumer spending and business investment. The typhoon also disrupted production supply chains. The poor results suggest that the stimulus measures employed by Prime Minister Shinzo Abe in December to buffer the economy from the impact of the tax increase have thus far been ineffective.

Despite the coronavirus outbreak and the weak fourth-quarter GDP data, the Japanese government said in its February monthly report that the economy continues to recover moderately amid ongoing weakness in manufacturing activity and exports. Nevertheless, a recent Bloomberg poll reports that nine out of 14 economists expect Japan’s economy to contract again (0.25% on average) in the first quarter of 2020 due to regional disruptions tied to the coronavirus. However, a Nikkei survey was significantly stronger. It showed a consensus forecast for Japan’s first-quarter annualized economic growth of +0.5%. On Friday, the au Jibun Bank Flash Japan Composite PMI seemed to confirm the negative view, with private sector output falling at the fastest pace in nearly six years.

Manufacturers still wary about the economic impact of coronavirus

Indeed, the monthly Reuters Tankan survey revealed widespread concern about the spread of the coronavirus and its deleterious effect on the global economy. The sentiment index stood at -5, a modest improvement from -6 in January, but still a negative reading for a seventh consecutive month. On a positive note, the service sector index showed a small improvement, climbing to +15 from +14 in January. As expected, the weakest services segments included retailers, information technology, and communications.


Equity markets in China rallied to a one-month high on February 20, encouraged by a rate cut and promises of more support from the central bank, falling numbers of new coronavirus cases, and some encouraging surveys pointing to earlier-than-expected factory openings in some provinces (though not Hubei and its capital, Wuhan). Early factory reopening is critical for the short-term prospects for China's industrial production and manufacturing output. There was also talk of a government bailout for China's stressed airline companies and a takeover of troubled regional airline, Hainan Airlines.

On Thursday, the Shanghai Composite rose 1.8%, the CSI 300 large-cap index gained 2.3%, and the Shenzhen Component Index (the main index of 500 stocks for the Shenzhen Stock Exchange) added 2.4%. Many of China's securities companies rose by 10%, their daily limit. These strong gains were sustained easily on Friday, with little evidence of profit taking.

Conflicting policy goals: Containing the virus versus restarting the economy

One month after the lockdown began, Chinese authorities in some regions and cities continue to move aggressively to contain the spread of the coronavirus. Parts of Beijing remain under lockdown following a cluster of 36 cases at one major hospital and one confirmed case at another. These widespread travel and quarantine steps—often decided at the local government level of the city or county—are negative for the economy and indicative of the conflict between the twin goals of beating the virus and getting China back to work. 

Despite few signs of life in the passenger travel data after the Chinese Lunar New Year, there were signs of progress in restarting factories and commerce in parts of China not subject to strict quarantine controls. For example, in Zhejiang province, an important coastal manufacturing and export hub, key international trade centers for textiles and consumer goods opened three days ahead of schedule, having been closed for 18 days due to the outbreak. Encouragingly, 60% of retail shops in the province are reported to be open again, though it will take time for business volumes to return to normal. The Zhejiang government has been quick off the mark, simplifying approvals for factory reopening and allowing chartered transport for returning workers. It hopes that production can be back to 75% of normal by the end of February.

Money and credit grew in January

China's credit data for January beat expectations. New bank lending and total social financing, the broadest measure of credit, both posted record monthly highs. However, January is a seasonally strong month, and a year-on-year comparison puts credit creation on a gradual uptrend as in the fourth quarter. The January release reflects credit conditions ahead of the Lunar New Year and, therefore, misses much of the coronavirus impact. In terms of composition, the numbers show downward pressure continuing on shadow banking activity, a key medium-term priority for China's financial regulators. Net government bond issues were a standout at over three times higher than in January 2019, confirming that lending policy was easing before the coronavirus struck.  

People's Bank of China (PBoC) cuts prime lending rate

As widely expected, China's central bank followed its early February cut in interbank rates with further cuts to key rates. On Monday, the medium-term lending rate was cut to the lowest level since 2017, while the PBoC also injected RMB ¥100 billion of liquidity into the money markets via seven-day reverse repurchase agreements. This was followed on Thursday by a 10-basis-point reduction in the important loan prime rate, a key lending rate for banks. Further cuts of 10 basis points are expected in the coming months. While providing support against the coronavirus disruption is a short-term priority, most market analysts do not look for major monetary easing.

The PBoC released its quarterly Monetary Policy Report (MPR), in which it said that it was important to provide support to firms hit by COVID-19, but the impact on the Chinese economy in terms of magnitude and duration was expected to be limited. Consumer price index (CPI) inflation jumped 1.0% in January to 5.5%, the highest rate since 2011, but the MPR indicated the central thought the situation manageable. The Lunar New Year, higher pork prices due to African swine fever, and the impact of supply shortages due to the coronavirus were all to blame. China's core inflation, in contrast, was unchanged at 1.5% year over year. Even a temporary rise in CPI inflation is unwelcome, however, with the economy under pressure. It reduces real household income at a time when the trend growth in nominal income has slowed to around 6.0%.

Other Key Markets

Turkish shares fall on rising tensions with Russia

Stocks in Turkey, as measured by the BIST 100 Index, fell about 2.8%. The market, along with other emerging markets, benefited early in the week from news of Chinese stimulus measures intended to blunt the economic impact from disruptions stemming from the COVID-19 coronavirus. Expectations for a central bank interest rate cut—which did occur on Wednesday—were also supportive.

However, rising tensions between Turkey and Russia weighed on the market later in the week, as Turkish President Recep Tayyip Erdogan threatened to make more significant military moves in Syria, a Russian ally, in retaliation for recent Turkish troop casualties apparently caused by Russian-backed Syrian forces. Erdogan also wants to prevent the Syrian military’s advance on Idlib, one of the last major strongholds for various rebel groups in the nine-year-long Syrian civil war.

In fact, Erdogan—who riled the U.S. and other NATO allies with his purchase of Russian S-400 military hardware in recent months—seems to have done a geopolitical about-face, as media reports indicate that he has requested U.S. Patriot missile batteries to protect Turkish military assets from Syria’s offensive. Erdogan also seems interested in preventing a new wave of war refugees from entering Turkey.

Brazilian markets fall on virus-related commodity weakness

Shares in Brazil, as measured by the Bovespa Index, fell about 1.0%. After a solid first half of the week, equities weakened on Thursday and Friday amid concerns that the spreading coronavirus would reduce Chinese and global demand for Brazil’s commodity and natural resource exports. Disappointing economic data readings, consumer price inflation at 25-year lows, and weakness in the currency, which has recently touched all-time lows versus the U.S. dollar, were some of the other factors weighing on the market.

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