Apple and LVMH are a bellwether of things to come

U.S. stock futures are edging higher this morning, despite the ongoing global outbreak of coronavirus. All eyes are on corporate results today, especially two big companies well implanted in China: LVMH and Apple.

 

Futures tied to the Dow Jones Industrial Average rose 0.2%, recouping some of yesterday’s loss, as investors gage global efforts to contain the deadly virus outbreak in China.

Earlier, the Stoxx Europe 600 switched between gains and losses, while exchanges in China and Hong Kong remained closed for the Lunar New Year holiday.

Spooked by the spread of the virus, investors keep reaching for safer assets like U.S. government bonds. The situation has also led to a severe downturn in cyclical stocks in general (raw materials, automotive, etc.) and those exposed to Chinese consumption in particular. Luxury goods, for example, which is far from being the haven of peace that we experienced during the recent moments of market tension.  It's hard to separate reality from the statements of the prophets of doom about how the virus will develop. The epidemic will necessarily have negative economic consequences, especially since the Chinese authorities have advised companies to remain closed beyond the Lunar New Year holiday week.

Since the coronavirus has been on the rise, the Chinese authorities have been publishing daily disease reports. Tuesday morning's report shows 106 deaths for more than 4,500 contaminations in the country. Hubei Province, the focus of the epidemic, is virtually sealed off, resulting in the confinement of 56 million inhabitants. About fifty infected people have been taken care of outside China, all in connection with a stay in Hubei Province, including 3 in France, 5 in the United States and 4 in Japan.

In this context, the publication of French luxury giant LVMH's 2019 sales figures and its comments on China's environment today will be closely watched. Apple's as well, since the California-based group is also on the agenda this Tuesday, after the US closing. These two barometers have a role to play on investor morale.

Today on the agenda, we have the US Durable Goods Orders, the S&P/C&S Real Estate Price Index and then the University of Michigan Consumer Confidence Index and the Richmond Fed Manufacturing Index. In addition, a public speech by Fed member John Williams is also scheduled to take place.