Market Drivers February 17, 2020
PBOC pumps money – risk on flows continue
Japanese GDP sinks like a stone
Nikkei -0.69% Dax n/a
UST 10Y 1.59%
Oil $52/bbl
Gold $1582/oz
BTCUSD $9806

Europe and Asia:
JPY GDP -6.3% vs. -3.7%

North America:
No Data

The start of the week saw a mild but steady risk on bias as PBOC suggested that it may offer a lower rate on its medium-term lending facility in effect easing credit conditions in response to the ongoing coronavirus crisis.

The news helped to lift Chinese equities above their Lunar New Year opening gap with indices now erasing all of their coronavirus losses. Investors continue to take solace in the fact that the virus does not seem to be spreading outside of China in any significant way and even within China the official case count outside of the hot zone of Wuhan province is declining.

Still, it may be premature to celebrate victory as many scientists believe the long incubation period of the disease could quickly escalate the global count in the near future. But with every passing day, the lack of any evidence of pandemic bolster’s the bullish case that this is a one-off event that will not have any long-lasting negative consequences for global growth in 2020.

Meanwhile, in Japan the mood was not nearly as sanguine as Japanese GDP figures missed their mark badly contracting at a whopping -6.3% rate versus -3.7% forecast. The new sales tax was the culprit sending consumer spending plummeting and with the coronavirus impact in Q1 the figures for Japan will only get worse.

For now however, the markets are happy to ignore any and all negative fundamental news as traders frolic in the easy credit conditions of the G-3 central banks. With US financial markets closed for President’s day holiday the price action should be muted for the rest of the day, but barring any exogenous news shocks the risk on flows could prevail in thin liquidity conditions as bulls try to run the 3400 hundred level in the S&P and perhaps even the 110.00 figure in USDJPY