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Posted: Jan 31, 2020 1:32 PM
Updated: Feb 3, 2020 5:15 AM


A version of this story first appeared in CNN Business' Before the Bell newsletter. Not a subscriber? You can sign up right here.

For stocks in Shanghai and Shenzhen, it was bad day of epic proportions.

The Shanghai Composite nosedived 7.7% in its first day of trading following an extended Lunar New Year holiday — its biggest drop since August 2015's notorious 'Black Monday,' when global markets were rattled by China slowdown fears.

The tech-heavy Shenzhen Composite plunged 8.4%, its worst decline since 2007. Taken together, $445 billion in market value was wiped out as the deadly coronavirus continues to spread globally, my CNN Business colleague Laura He reports.

The latest: The outbreak has killed at least 362 people and infected more than 17,300 around the world. Hong Kong just announced further border closures, part of efforts to restrict travel from China.

A massive sell-off was expected. Chinese markets, which had been closed since January 23, needed to play catch up with the rest of Asia, whose shares were battered last week. Plus, business closures throughout the country are expected to dramatically knock earnings for the first quarter of 2020.

That may be one reason that stocks in Europe are higher Monday. US stock futures also point to gains.

But another shock on Tuesday could reverberate globally. The daily limit for most stocks to fall in China is 10%, so markets there could face another dramatic dive — leaving investors rattled.

Tai Hui, JPMorgan's chief market strategist for the asset management division in Asia, told clients Monday that the bank still thinks economic activity 'should recover swiftly once the number of new cases comes under control,' while warning of a 'challenging time ahead' for stocks.

'As the number of infections is still likely to rise in the weeks ahead, we would expect the Chinese onshore equity market to come under pressure,' he said.

Much depends on the Chinese government's ability to maintain liquidity. The People's Bank of China said Sunday that it would inject tens of billions of dollars into Chinese markets to keep cash flowing to banks. Protecting the country's financial markets and economy is a top priority for the government, Laura points out.

Alphabet to cap off a stellar earnings season for Big Tech

Alphabet, the parent company of Google, reports results for the final three months of 2019 after US markets close on Monday — finishing a strong earnings season for Big Tech that's further boosted the market clout of companies like Amazon.

What's expected: Analysts are looking for Alphabet's revenue to have jumped by at least 19% last quarter. Goldman Sachs strategists note that the company is pioneering a longer term shift toward sources of revenue beyond advertising, such as Google Cloud — so expect investors to pay attention to growth there.

Potential sticking points: Any comments on privacy and regulation and the update on Google Pixel sales, according to Bank of America.

It's also a big moment for Alphabet CEO Sundar Pichai, who took an expanded role after co-founders Larry Page and Sergey Brin stepped down from their executives jobs in December. The shakeup has been popular with investors.

Investor insight: Alphabet shares are up more than 17% in the past six months. The S&P 500 has gained roughly 8% in the same period. The company recently joined the club of $1 trillion public companies, but its market value has since slipped back down to $988.7 billion.

Even so, Alphabet, Facebook, Microsoft, Amazon and Apple now account for 19% of the S&P 500's market cap.

Ryanair troubles highlight Boeing's deep crisis

Ryanair wanted to carry 200 million passengers by 2024. But that goal could be pushed out by as much as two years due to delayed deliveries of the Boeing 737 Max, the company said Monday.

The budget airline, which expected only six months ago to add 30 737 Max jets to its fleet by summer 2020, thinks its first delivery will now come in September or October, my CNN Business colleague Hanna Ziady reports.

That's bad news for Ryanair, but also for Boeing — damaging its relationship with one of the plane maker's biggest European customers. Ryanair is already seeking compensation for its losses.

In its most recent earnings report, Boeing detailed nearly $19 billion in costs associated with the 737 Max crisis. Yet that price tag could still increase significantly. Ryanair's problems show why.

Up next

Alphabet reports results after US markets close.

Also today:

  • The January ISM Manufacturing Index, a key gauge of the sector, arrives at 10 a.m. ET. US construction spending for December posts at the same time.
  • The Democratic presidential primary kicks off in Iowa.

Coming tomorrow: Earnings season rumbles on with results from BP, Snap and Disney.

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