Coronavirus flips markets to “risk off” theme

Intermediate
  • The Middle Eastern tensions that started 2020 and the US-Sino trade war that impacted markets through 2019 seem a distant memory now with the de-escalation in the Middle East and the signing of the US-China phase one trade deal.
  • BUT markets have now focused on a new geopolitical threat, the spreading Wuhan coronavirus.
  • Choppy price action last week reflected mixed reports regarding the extent and danger of the coronavirus and its potential impact on the global economy, but by the end of the week, going into the Chinese Lunar New Year celebrations, markets were reacting in a more negative way.
  • Asian stocks were weak throughout the week, but US Stock averages plunged Friday, sending negative technical signals, whilst European equity indices also stay vulnerable.
  • US Treasury Bonds alongside global bond markets rallied to multi-month high prices/ low yields with a flight to quality bid, whilst the safe haven Japanese Yen also rallied.
Bond yields lower
  • Earnings season has continued with broadly positive results thus far in the US and Europe, but the concerns regarding the Wuhan coronavirus overshadowed this positivity at the end of last week.
  • The European Central Bank (ECB) portrayed a still very dovish tone in their meeting statement and press conference last Thursday, which sent the Euro lower, with EURUSD breaking a notable support at 1.1065.
  • Slightly better macroeconomic data from the UK has eased expectation that the Bank of England Monetary Policy Committee will cut interest rates at their meeting on Thursday this week, which saw the Pound (GBP) rebound versus the US Dollar (GBPUSD) and Euro EURGBP last week.
gbpusd
  • The U.S. impeachment trial has begun in the Senate but with little impact on markets thus far as the belief remains that the Republicans will not vote to remove the President from office.

Key this week

  • The main geopolitical focus this week will likely be on updates regarding the spread of and danger from the Wuhan coronavirus.
  • Chinese markets are closed all week for the Chinese New Year holidays.
  • Central Bank activity sees the Federal Open Market Committee (FOMC) of the US Federal Reserve interest rate decision and statement Wednesday, then the Bank of England (BoE) interest rate decision and statement Thursday, with chances for an interest rate cut.
  • The macroeconomic data spotlight will be on German IFO Monday, US Capital Goods Orders and US Consumer Confidence Tuesday, Australian Consumer Price Index (CPI) Wednesday, German Unemployment and CPI, plus US Gross Domestic Product (GDP) Thursday, with Friday bringing Japanese CPI, Eurozone and Canadian GDP, plus US Core Personal Consumption Expenditure (PCE)
  • A big week for earnings reports and key to watch this week can be seen in the table below.
  • As ever, the US impeachment trial should be monitored.
Date Key Macroeconomic Events
27/01/20 Chinese markets closed all week for New Year holiday; German IFO
28/01/20 US Capital Goods Orders; US Consumer Confidence
29/01/20 Australian CPI; US Federal Reserve and the Federal Open Market Committee (FOMC) interest rate decision and statement
30/01/20 Bank of England (BoE) decision and statement; German Unemployment; German CPI; US GDP
31/01/20 Japanese CPI; Eurozone GDP; Canadian GDP; US Core PCE
Date Key Microeconomic Earnings reports
27/01/20 Nothing of note
28/01/20 Pfizer (PFE), United Technologies Corporation (UTX), Lockheed Martin Corporation (LMT), Starbucks Corporation (SBUX), 3M Company (MMM), Louis Vuitton (LVMH)
29/01/20 Facebook Inc (FB), Boeing Co (BA) General Electric Company (GE), Tesla Inc (TSLA)
30/01/20 Amazon.com Inc (AMZN), Verizon Communications Inc (VZ)
31/01/20 Exxon Mobil Corp (XOM), Chevron Corp (CVX), Caterpillar Inc (CAT)

Editor in chief

Steve Miley has 29 years of financial market experience and as a seasoned expert now has many responsibilities. He is the founder, Director and Primary Analyst at The Market Chartist, the Editor-in...continued

Comment on this video

Your email address will not be published. Required fields are marked *


Latest Related News

Day Trade Ideas: Video analysis – Dollar, WTI Crude, Gold, Emini S&P, Dow Jones

Wide analysis of the US Dollar, Crude Oil, E-Mini Future S&P 500 and the Dow Jones. Also taking a look at Gold and how it is doing in these volatile times. Continued

Pound shifts to more bullish (GBPUSD Forecast)

GBPUSD day trade outlook: Intermediate-term shift to bullish and upside risks  A strong advance Tuesday through key 1.2542 resistance for an intermediate-term shift from neutral to bullish, to build on the strong, very early July rally above 1.2510 resistance and to now also overcome the 1.2580 level to 1.2592, to keep the risk to the upside into Wednesday.  Day trade setup We see an upside bias for 1.2592 and 1.2633; a break here aims… Continued

Elliott Wave Analysis: EUR/GBP In Bearish Reversal

Hello traders, EURGBP started firmly dropping from the 0.918 level (also level of a Fib. ratio of 61.8), giving us first signs of a possibly completed A-B-C move in a higher degree wave B) correction. We are now observing a minimum three-wave decline in play, so be aware of possible corrections/setbacks within the decline (first one can be seen from the lower corrective channel line).… Continued

“Risk on” resumes! Data wins over virus concerns

Macroeconomic/ geopolitical developments Global financial markets have started to resolve the indecisive theme that has been evident from the middle of June into more of a “risk on” bias to start July.Markets have been caught between two competing forces; increasingly positive economic data compared to consensus and the rise in COVID-19 cases (particularly in the southern states of the US, but also in pockets globally).The… Continued

Quiet conditions in Forex

Positives appear on Aussie and Kiwi (AUDUSD and NZDUSD)Whilst Euro-Pound posts a major negative (EURGBP) Continued

Forex Brokers in your location