China coronavirus outbreak scares investors

US stock exchanges, supported by strong economic data and corporate reports, closed trading on 17January at new record levels.The rally was also supported by the partial resolution of the trade standoff between the United States and China after the signing of the agreement. At the end of the session, the S&P500 rose by 0.39%, reaching 3329 points. 10 out of 11 sectors, with the exception of energy, finished trading in the green. On January 20, US stock exchanges were closed in connection with the country's celebration of Martin Luther King Day.

Global stock markets are adjusted afterthe rally of the beginning of the year amid investors' concerns about a downgrade of Hong Kong and an outbreak of previously unknown pulmonary disease in China. Investor fears intensified after reports that the virus is transmitted from person to person. An unknown disease has already led to four deaths, despite the fact that it was diagnosed in approximately 200 people. The risks of the epidemic pose a threat to consumption during the New Year on the Eastern calendar, which could negatively affect the Chinese economy. Investors fix their positions in order to protect themselves from the corresponding risks.

Asian stock indices are falling against this background.The Japanese Nikkei loses 0.9%, the Hong Kong Hang Seng - 2.8%, the Shanghai CSI 300 - 1.7%. New protests in Hong Kong and Moody's decision to lower the rating of this region from Aa2 to Aa3 (AA- on the scale of other agencies) add to the negativity of Chinese assets. European stock exchanges fell by more than 0.5% at the opening. Investors ignored successful negotiations between Macron and Trump on digital taxes.

The demand for safe assets is growing.Bonds are increasing in price. The yield on the 10-year US Treasury note fell below 1.80%. Gold is hovering around $1,555 an ounce. Brent oil is losing more than 1%, falling below $65 per barrel. There is no appetite for risk. We expect the S&P500 index to correct to 3300-3310 points during today's session.

No significant macroeconomic statistics are planned today.

Fourth Quarter Results Before Market Openlast year, Halliburton, the oil equipment manufacturer, will present. A two-digit decrease in the company's revenue and profits is expected. If the report shows that the management was able to reduce costs so as to offset the negative effects of the slowdown in North America, Halliburton's performance may be better than expected. This will give a positive impetus to its shares. After the market closes, IBM and Netflix will report. Consensus implies a decrease in revenue and profits from IBM within 1%. Netflix, on the other hand, expects a solid performance increase.

The technical picture for the S&P500 remainsambiguous. Overbought conditions and signs of bearish divergence in the RSI remain, posing a threat of correction. At the same time, the MACD indicator has improved. The S&P500 remains on the uptrend line that has been going on since 2016, which acts as support for it. The index is testing a trend line dating back to 2009, which acted as resistance from 2012 to 2015, as well as at the beginning of 2018. However, overcoming it will not be an easy task.

January 21, IBM will begin the reporting season fortechnology giants who find it difficult to live up to high investor expectations after reaching the first phase of the US-China trade deal. It is expected that the company's revenue and profits will remain at the level of last year. The report will be able to show in what position the global corporate demand for IT solutions, which has weakened recently, is. Consulting revenue is likely to be under pressure as well. The only positive point in the report could be the full integration of IBM's business with the acquired company Red Hat. Joining Red Hat may support cloud revenue. In addition, after the completion of the transaction, management had reason to improve the forecast for free cash flow and EPS for 2020.

Netflix Results Coming After ClosureThe main session on January 21 may shed light on how the company copes with the growing competition in streaming. Large-scale investments by the company in content can lead to an increase in the number of subscribers. The release of expensive but widely acclaimed films, including the movie The Irishman, filmed by renowned director Martin Scorsese, may allow Netflix to surpass its own forecast for the number of subscribers, despite the launch of competing streaming services Disney + and Apple TV +. It is significant that Netflix's films have 24 nominations for the Oscars this year, which may indicate an increase in the popularity of studio content. A steady increase in the number of subscribers will reduce investors' concerns about negative free cash flow, as it will increase the likelihood of its soon coming out in plus due to higher incomes. If Netflix management provides new opportunities in the form of updated tariff networks to expand the audience in developing countries, business prospects will improve. This will cause a positive reaction of quotes.

On January 23, one of the giants will reportIntel's semiconductor industry. Its results will bring more clarity to investors' views on the state of the industry after progress in China-US trade relations. The company is forecasting revenue growth with a decrease in EPS. The main difficulty for Intel today is the competition with AMD. Intel loses the competition in the production of nanoprocessors, which complicates the prospects of the corporation. In 2020, Intel expects sales growth of 2%, and AMD plans to increase them by more than 25%. Such a lag could lead to a narrowing of Intel's market share. So, if the management does not provide positive forecasts for the direction of nanoprocessors, it is difficult to wait for further stock growth.

Source:  https://clck.ru/LyPje