Wednesday, 12 February 2020 07:42

Five Things You Need to Know to Start Your Day

Here are some of the things people in markets are talking about.

Fed chairman Powell said he’s watching the coronavirus impact carefully, Mastercard won an approval to set up business in China and Lyft beat analysts estimates — but disappointed investors. Here are some of the things people in markets are talking about today.

Closely Watching
Federal Reserve Chairman Jerome Powell is keeping a close eye on the deadly outbreak of the coronavirus — which has now been officially named Covid-19. “In particular, we are closely monitoring the emergence of the coronavirus, which could lead to disruptions in China that spill over to the rest of the global economy,” Powell said in remarks before U.S. lawmakers Tuesday, though he stopped short of saying the outbreak had changed the Fed’s baseline outlook for the U.S. economy, or the expectation among many members of the Federal Open Market Committee that rates will remain on hold this year. U.S. equities climbed as investors digested the latest views from the Fed chair and Treasuries slipped. “The FOMC believes that the current stance of monetary policy will support continued economic growth, a strong labor market and inflation returning to the committee’s symmetric 2% objective,” Powell said. “As long as incoming information about the economy remains broadly consistent with this outlook, the current stance of monetary policy will likely remain appropriate.”

Modest Gains
Asian stocks looked set for modest gains Wednesday as investors weighed the spreading virus against expectations for policy support. U.S. equities closed off their highs on reports of fresh antitrust scrutiny for tech firms. Futures were little changed in Australia and pointed higher in Hong Kong and Japan, which reopens after a holiday. The S&P 500 Index pared gains amid reports the Federal Trade Commission is looking into acquisitions by some large technology firms, though still posted a fresh all-time high. Ten-year Treasury yields rose, while the dollar dropped for the first time in five sessions. Elsewhere, oil bounced back from Monday’s swoon and gold dipped. Bitcoin rose back above $10,000.

Master Win

Mastercard Inc. won approval to set up a bank card clearing business in China, gaining access to a $27 trillion payments market as part of the nation’s financial opening. The announcement by the People’s Bank of China on Tuesday signals the country is moving ahead with the speedier opening of its financial system that was agreed on as part of the phase one trade deal with the U.S., even as it grapples with a virus outbreak. Mastercard and its partner, NetsUnion Clearing Corp. will need to complete preparation work within a year, the central bank said. Mastercard called the decision “encouraging,” with China being one of its most important markets. Further approval will also be needed after the preparations are over, it said in a statement. China is opening up its financial markets this year to allow foreign firms to set up fully owned operations to run insurance businesses, asset management and investment banking.

More Lyft Please
Lyft Inc. beat analysts’ revenue estimates for the fourth quarter and narrowed its net loss — but it wasn’t enough to wow investors, who punished the ride-hailing company for not promising profits faster. The shares dropped almost 4% in extended trading. The company also issued a forecast for first-quarter revenue that was slightly ahead of Wall Street estimates, while the company’s sales projection for 2020 as a whole was in line with analysts’ expectations. Lyft said revenue for the three months ending Dec. 31 jumped 52% to $1.02 billion from the same period a year ago. Analysts had expected revenue of $985.8 million. The company shrunk its adjusted net loss, which excludes stock-based compensation, acquisition expenses and other costs, to $121.4 million during the fourth quarter, compared to $238.5 million for the same period a year ago. Analysts had expected an adjusted loss of $161.9 million, according to data compiled by Bloomberg.

Short Selling Flurry
An exchange-traded fund focused on Chinese technology companies is absorbing a flood of cash amid the coronavirus outbreak that has roiled global markets, but the inflows may not be as bullish as they seem. Over $49.9 million was added to the $695 million Invesco China Technology ETF, or CQQQ, in the week ending Feb. 7. That’s the most since October 2018, and net inflows for the past four days were the biggest for such a period since 2017. Inflows sometimes indicate create-to-lend activity, in which shares of a fund are created for traders wagering on a decline to borrow and sell short. And in a signal of bearish activity, demand to short the ETF is growing. CQQQ’s short interest climbed to the most since August 2019, according to S3 Partners data. Also, the fund’s borrowing rate rose last week, the data show. At the same time, bullish wagers cannot be ruled out as the fund’s 1.2% share plunge in January — the first monthly decline since July 2019 — may have attracted some buyers.

What We’ve Been Reading
This is what’s caught our eye over the past 24 hours.

Turned away on virus fear, this cruise ship risks running low on food.
China’s cities are locking up residents to prevent the spread of the coronavirus.
Singapore luxury co-living comes with steep prices, and no apologies.
Five hedge fund heads made more than $1 billion last year — each.
Biden is bracing for a setback in the crucial New Hampshire primary as Sanders pulled in a 10-point lead.
Commonwealth Bank profit just beat expectations on the housing rebound.
Love Tough Mudder? Try ‘Everesting’.
Penguin colonies are shrinking in Antarctica due to climate change.

(Bloomberg)

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