Crop Futures Slumping Due To Coronavirus Outbreak In China

Recently, crop futures traded in Chicago sank as China’s death toll from the coronavirus outbreak increased amid government reports that the infection was spreading more quickly, threatening demand in the world’s largest consumer of agricultural commodities and the biggest soybean importer.

A lot of food crops prices have dropped. For instance, soybeans dropped below $9 a bushel for the first time since early December and have lost more than 6% this month, while corn was down by over 1% and wheat fell by 2% as selling gripped global financial markets in a deepening risk-off mood.

A report by Bloomberg says the lockdown on movement and travel in many areas of China and the preference among the country’s people to stay at home while the outbreak rages rather than eat at restaurants look set to hammer demand in a nation already ravaged by African swine fever, which has slashed hog herds, and reduced consumption of livestock feed, such as soybean and rapeseed meal.

China is the world’s top producer and consumer of rice and wheat, and the second biggest for corn. The outbreak of the virus is adding a blow to agricultural markets hoping for more Chinese purchases of American farm products after the signing of the U.S. trade deal earlier this month.

On Sunday (Jan 26), Chinese authorities said the virus isn’t yet under control despite aggressive steps to limit the movement of millions of people who live in cities near the center of the outbreak.

The country has however extended the Lunar New Year break to Feb. 2, having originally been slated for Jan. 30.

Analysts view of the effect of the outbreak on the stock market

National Securities chief market strategist, Art Hogan said in an interview: "My guess is if we're going to rationalize a market that's pretty stretched right here, it's going to happen right now. We have about a third of the S&P 500 reporting. We're going to see the losers lose a whole lot more than we've seen in a while. The index itself could probably pull back 3% to 5%. Stocks are relatively priced for perfection, and you tend to have bad news or in-line news when that happens".

Hogan has insinuated that the week could be likely rough as futures on the DJIA (-1.49%), S&P 500 (-1.15%) and the Nasdaq Composite (-1.96%) have all showed a lower opening prices.

Effect of the outbreak on the Dow Jones Industrial Average

 With the rapid spread of the Coronavirus, the Dow Jones futures have plunged. Apple and Telsa seem to be the leader with huge earnings. The market tumbled today (Jan. 27). The stock market rally retreated last week due to the coronavirus outbreak. While Apple (AAPL) stocks edged lower last week, shares of AMD, Microsoft and Facebook fell;  and Telsa stock surged 11%.

The fiscal Q1 earnings for Apple are expected on Tuesday night and analysts expect the shares to climb 8% to $4.53 per share, while revenue rises 5% to $88.35 billion. Wall Street predicts a growth of 10% in Apple's earnings in fiscal 2020 and 16% in 2021. On the DJIA, Apple stocks reversed from a high on Friday, and the shares further went down by 2% in the premarket.

Wall Street believes that shares of AMD will surge 289% to 31 cents with sales jumping by 48% to $2.11 billion. Stocks of AMD on Friday fell by 2.6%. AMD was a part of the early 2019 stock rally, however, its shares sank today by 3.5%.

Telsa's earnings are due late Wednesday and analysts expect the earnings to fall 15% to $1.65 per share with its revenue down by 4% to $6.45 billion. Telsa expects to deliver this year in the areas of production and demand. On Friday, shares of Telsa were on the edge and leaped 10.6%. Telsa being among the top earners of last week shows that investors are confident despite concerns of the rapid coronavirus outbreak.

Analysts predict Facebook's earnings to rise by 6% to $2.52 per share, with a revenue up by 23% to $20.87 billion. The tech giant's earnings are expected to jump 44% in 2020.

Microsoft's stock retreated 1.2% last week and the shares fell by about 2% in the early hours of today's trading.

The Dow Jones futures fell 1.55% versus fair value. The S&P 500 futures dropped by 1.5%, while the Nasdaq 100 fell by 1.9%. Stock markets have been closed for holidays in China, Hong Kong, South Korea, and Australia. Dow Jones futures could become volatile with the coronavirus crisis expanding in the peak earnings week.

It is important to note that airlines hotel, commodity and other Chinese companies were the notable losers of the week. Chinese e-commerce giant, Alibaba (BABA) sank by 6% but it still remains above the 50-day line.

The Dow Jones is 2.2% above the 50-day line. The S&P 500 index is 3.1% above the 50-day line, the Nasdaq composite is at 5%, while the Nasdaq 100 is at 5.9%.

According to analyst reviews, major indexes have been up since the first week of December 2019. The coronavirus could trigger a pullback in the stock market, even though the market rally has been due for a pullback.

 

The China Coronavirus Outbreak

As of Monday morning, the cases of the outbreak were put at 2,744, while 80 deaths were confirmed. Health officials said the virus can be spread from individuals even before they become symptomatic, making it difficult to contain the virus. About 15 cities and 57 million residents are currently under travel restrictions, however, millions left earlier for the Lunar New Year.

The United States currently has five confirmed cases of coronavirus. Other countries like France, South Korea, Australia, Thailand, and more have also confirmed cases of the virus.

As major stock indexes continue to plunge as a result of the pressure of the coronavirus outbreak, some indexes have already noted solid gains through the close of trading on Friday. Investingport hopes to keep an eye on the stock market to bring in timely reports.