IS THE CORONAVIRUS DRAGGING THE MARKET?
FX Overnight Markets:
The ever-spreading Wuhan coronavirus sent a risk-off impulse through the FX space, as new deaths & infections were recorded in China. The government deployed a mix of measures to address the crisis & extended Lunar New Year holidays until Feb 2. While onshore trading remains closed for LNY, USD/CNH defied the formation of a 50-/200-DMA "death cross" and surged past the CNH6.95 mark,albeit failed to make headway beyond the Jan 6 high of CNH6.9777.
Safe havens were well bid. JPY led gains in the G10 basket, with USD/JPY gapping lower at the open& testing the water under Y109.00. Antipodean FX sold off on a flight to safety. Australia confirmed that a fifth person in the country contracted coronavirus, as reported earlier by the local press.
Selling pressure hit Asian EMFX,with BI stepping in to curb IDR weakness.
Highlighted risk-off moves played out as liquidity was dented by market holidays in China, Australia, South Korea, Hong Kong, Singapore,Taiwan and Malaysia & a regional holiday in Auckland, New Zealand.
FX Related Economic News:
Monday throws up a quiet day in terms of data, with the only European release scheduled being the German Ifo survey at 0900GMT. In the US the publication of figures on New Home Sales at 1500GMT and the Dallas Fed Manufacturing Survey at 1530GMT are worth noting.
FX Relative Performance:
- Tech giants Apple, SAP, Facebook, Samsung and South Korean chip maker SK Hynix announce earnings, as do Boeing, International Paper, GE, United Technologies, Lockheed Martin, Caterpillar, Lockheed Martin, Unilever, Exxon Mobil, Shell and Chevron.
- The Senate impeachment trial of President Donald Trump continues in Washington Monday.
- Fed policy makers are expected to open 2020 the same way they closed 2019 -- by holding interest rates steady Wednesday.
- The BOE meeting is highly anticipated Thursday after a series of dovish comments raised speculation policy makers could lower interest rates.
- The U.S. reports fourth-quarter GDP Thursday.
- The U.K. is scheduled to leave the European Union Friday.
Virus Fears Drive Sell-Off in Stocks, Oil, Yuan (Bloomberg):
Deepening fears about the economic and human impact of the deadly coronavirus sent stocks, crude oil and China’s yuan tumbling Monday, and spurred haven assets. Italian bonds jumped after regional elections.
The Stoxx Europe 600 Index sank at the open, with all 19 industry groups in the red. Contracts on the S&P 500 signaled the underlying index will add to Friday’s losses, which were the most since October. Many Asian markets were closed for holidays with the exception of Japan, where stocks slumped and the yen climbed. Futures on Chinese shares fell more than 5% and the yuan erased this month’s trade-deal driven gains in the wake of news that the virus continues to spread, with no peak in sight.
Ten-year Treasury yields and West Texas crude both hit their lowest levels since October. In Europe, Italian 10-year bond yields slid by the most since August after a regional election bolstered prospects for stability in the country’s current coalition government.
January 27, 2020