The Stock markets continue to plunge from Coronavirus.Created: 4th Feb 2020
The Coronavirus continue to dominate the headlines, affecting anything to do with China, with concerns mounting of a China slowdown. Today’s Podcast will look at the effect on Resources (Copper), Currencies (AUDUSD and NZDUSD) and the global stock markets.
We look at the major drivers for movement this week with Ford, General Motors, Google and Twitter having their results and a little economic announcement called Non-farm payroll. Adrian then considers the markets that are ready to move, looking at key support and resistance levels for GBPNZD, EURCAD, UK100, Dax, High Grade Copper, AUDUSD and NZDUSD. In Defining Trading, Adrian defines a Bear Market, and what such falls would mean for the US stock indices.
Chinese markets open up again following the new year celebrations.
Over the past week the infection rate of theCoronavirus (or Wu Flu as it’s called in Hong Kong) has accelerated.
The number of infections climbs daily, now standing in excess of 14,000 whilst fatalities also track higher in line.
Chinese markets have to play catch up so not surprising to see the sharp falls, similar to those witnessed last week on the Hang Seng in Hong Kong
Outside China and HK, Global stock markets also had a turbulent week, with every major stock index notching up the biggest losses since last October.
Despite positive W4 results Apple and Amazon, US indices crumpled with significant falls on Friday.
Dow Jones -733 -2.5%
S&P500. -70 -2.12%
FTSE -300 -4%
DAX -620 -2.85%
UK FTSE suffered more than most as resource stocks, such as Rio Tinto, BHP Billiton and oils suffered significant falls as commodities slumped in wake of Chinese lock down. The one exception being precious metals, as Gold kept to its tag as the risk off and safe haven weapon of choice.
UKOIL -3.9 -6.4%
USOIL -2.69 -4.95%
GOLD +20 +1.3%
COPPER. -0.1683 -6.3%
Copper, which is a bellwether for the state of the Chinese economy, fell sharply.
Over the past 12 days Copper has slumped 12% as traders fear a big slowdown in growth in China.
In keeping with the rout in commodities, the resource currencies got whacked.
Australia, which relies heavily on its resource exports to China, saw significant falls in the AUD. CAD took a beating, albeit modest in comparison to AUD.
AUDUSD -139 -2%
USDCAD -85 -0.65%
The coronavirus will continue to dominate headlines whilst not enough is known about transmission and infection rates. For now markets remain very on edge as a number of countries close all access to China its nationals - which is at odds with WHO guidelines which expressly state that countries should not block China off but improve detection and quarantining procedures.
For now fear and the unknown is the markets greatest problem.
Fear will only subside when more is know. And the infection rate slows - which does not look like happening anytime soon.
Outside of the coronavirus epidemic, the Senate trial of Donald Trump, following his impeachment in the House of Representatives, looks to be running its course.
It is very likely now, following the decision not to call any more witnesses, that Trump will be acquitted.
Brexit - at 11pm last Friday the UK left the EU. symbolic of course but now the hard work starts as the UK negotiates a trade deal with the EU. At the same time the UK will formally start full negotiations with US for a trade deal.
For now not much changes as the transition period means there will be little to no difference for most citizens. Sterling looks for further gains against both the Euro and the USD - although it won’t be a smooth ride a lot of the time.
The MPC’s decision to keep rates on hold sent GBP higher, as Expectations a little over a week ago were for a cut.
With rates being kept on hold, sterling buyers will be rewarded with better returns than otherwise would have been the case.
Data & Events
Another busy calendar this week. First Friday of new month heralds ~employment data this Friday and more Q4 earnings releases. Plus US PMI data and Australian rate decision
US ISM Manufacturing PMI. Pick up from surprising fall last month
RBA central bank policy meeting. no chase in rates expected although pressure will mount as Coronavirus epidemic takes its toll...
US Annual State of the Union address in Congress by Trump.
Interesting state of affairs as an impeached president will likely be celebrating his acquittal, and championing his achievements with a resurgent US Economy
US ADP employment data. A more volatile reading of US employment trends.
A pull-back from last months number.
US ISM Non manufacturing PMI data steady reading in line with last months.
the stronger the better for USD.
ECB President Lagarde speaks. Due to testify about economy and monetary policy in Brussels. Can move Euro and stock markets.
US Non Farm employment change.
160,000 new jobs expected
3.5% unemployment rate - unchanged from last month at multi-decade low
Average hourly earnings - a jump would unsettle markets - not likely but would see a jump in USD if that happened.
US 4th quarter earnings continues
Ford, General Motors, Alphabet, Twitter the stand outs.