By Geoffrey Smith
Investing.com -- Markets reeled after China revised its data to show a big jump in the number of confirmed Covid-19 cases, while the number of confirmed deaths rose by over 250. Central bankers are trying to stay calm, but the economic fallout across the world is becoming more and more visible. Another international agency slashed its estimates for world oil demand this year. MGM Resorts scrapped its guidance due to the virus and said its CEO will step down early, and the ghost of Jeffrey Epstein keeps cropping up in unexpected places. Here's what you need to know in financial markets on Thursday, 13th February.
1. Virus toll leaps as China comes clean(er) on counting
The number of confirmed Covid-19 cases leaped by one-third while the death toll rose by over 250 after Chinese authorities announced changes to their counting methodology. The Communist Party fired its top officials in the region of Hubei and the city of Wuhan, the outbreak’s epicenter.
Hubei province extended a forced shutdown of its factories by another week, while data showed Chinese car sales were down some 20% on the year in January, due partly to the impact of the virus.
International impacts were also in evidence: Singapore reported the number of its confirmed cases has topped 50, while the world’s biggest mobile telecom conference, the MWC in Barcelona, was cancelled due to contagion fears. The European Commission named the virus a “key downside risk” but left its forecasts for EU growth this year and next unchanged.
2. Central bankers put a brave face on virus impact
Global monetary officials tried to put a brave face on things, hoping that last year’s monetary easing measures would be enough to support the world economy through a soft patch.
IMF Managing Director Kristalina Georgieva said a “v-shaped” recovery for the world economy is still the Fund’s baseline scenario: “In other words, sharp decline in economic activities in China, followed by a rapid recovery and a total impact on China relatively contained.”
The European Central Bank’s chief economist Philip Lane said the eurozone economy could expect a “pretty serious short-term hit”, while Australia’s central bank governor Philip Lowe drew attention to the hit from the loss of Chinese tourist arrivals and disruptions to commodity purchases.
"Things are going to be softer than we thought,” Lowe said.
Canadian central bank governor Stephen Poloz was the outlier, talking up the resilience of the Canadian economy in a speech in Australia. Federal Reserve Chairman Jerome Powell also concluded his two days of testimony before Congress without giving any hint of more accommodation near-term.
3. Stocks set to open lower; MGM in focus after announcing CEO exit
U.S. equity markets are set to open sharply lower, with some profit-taking due after a hectic rally over the last couple of weeks on optimism generated by high liquidity levels and hopes for a quick end to the Covid-19 outbreak.
By 6:30 AM ET (1130 GMT), Dow 30 futures were down 243 points or 0.8%, while the S&P 500 contract was down 0.8% and the Nasdaq 100 contract was down 1.0%.
Stocks likely to be in focus in early trade include MGM Resorts (NYSE:MGM), which scrapped its 2020 guidance after the closing bell on Wednesday and which announced the early departure of CEO Jim Murren, and Cisco Systems (NASDAQ:CSCO), which warned of an extended soft patch this year due to the Covid-19 impact.
4. IEA slashes oil demand forecast
The International Energy Agency cut its forecast for world oil demand this year by 325,000 barrels a day, making it the most pessimistic of the three major agencies that make such forecasts. The U.S. government’s short-term energy outlook had predicted a drop of 300k b/d, while OPEC in its monthly report on Wednesday had cut its outlook by only 250k b/d.
The IEA said its estimates were “based on an assumption that economic activity returns progressively to normal in the second quarter of 2020."
The downgrades still haven’t been enough to elicit a coordinated response from OPEC and its allies. Newswires cited Kremlin officials as saying that Russia still hasn’t decided whether to cut output further beyond the parameters of the existing agreement, although Algeria’s oil minister touted the possibility of extending the current deal by three months, through June.
U.S. crude futures fell 0.6% to $50.86 a barrel, while Brent crude fell 1.0% to $55.23.
5. U.K. regulators probe Barclays' CEO's links to Epstein
Barclays (LON:BARC) announced that U.K. regulators are looking into the relationship between its CEO Jes Staley and the deceased sex offender and financier Jeffrey Epstein.
Staley had known Epstein since 2000, when the former headed JPMorgan’s private bank, where Epstein was a client. He had visited Epstein’s private island in 2015, shortly before taking over as Barclays (LON:BARC) CEO but has maintained he stopped all communication with Epstein after taking up his new job.
The bank said its board continues to have full confidence in Staley, who steered it to a 54% increase in net profit last year.
Barclays (LON:BARC) stock fell 3.0%.