Market Drivers January, 21 2020
Wuhan virus spooks markets
BOJ sees steady inflation outlooks
Nikkei -0.91% Dax -0.49%
UST 10Y 1.79%
Europe and Asia:
GBP UK Wages 3.2% vs. 3.1%
CAD Manufcaturing Sales 8:30
Global markets were roiled by news of new coronavirus out of Wuhan China, fearing a SARS-like outbreak in Asia that could disrupt economic activity and create a possible public health emergency.
The WHO confirmed that the new virus can now be transmitted by person to person contact and fears have increased that with Chinese New Year’s celebrations only a few days away, the massive migration of Chinese could spread the virus beyond its hot zone.
While the virus does not appear to be as deadly as SARS it spread to health care workers is a key concern as it suggests that the virus could be highly contagious.
For now, the Chinese authorities appear to be doing everything possible to contain the spread and chances of a widespread epidemic are minimal for now. Still, the news rattled global equity markets and given the massive rally since the start of the year provided a perfect excuse for some profit-taking in indices which is likely to continue in North American trade as US markets return to full force.
On the economic front, the UK labor data surprised to the upside with Claimant count lower than expected while the average wage rose 3.2% versus 3.1 eyed. This was the first good piece of news out of UK after a torrent of disappointing results last week and suggests that despite weakness in business demand, labor conditions remain firm. Still, all eyes will be on this Friday’s flash PMI reports to see how the post-Brexit activity is going. Cable was up slightly to 1.3050 and continues to see strong support at the 1.3000 figure even after last week’s deluge of disappointing data.
In North American today the calendar is quiet so currencies will likely take their cue from equities which are certainly due for some correction with shorts looking to press the 3200 level in S&P500 and 9100 level in Nasdaq on futures basis as profit-taking kicks in.