Coronavirus, Chinese Inflation and US Jobs Report
Here is what traders have been watching, the continuing effects of the coronavirus after the death toll exceeded the total from SARS. Meanwhile, Chinese inflation jumped, as the response to the virus caused shortages and pushed up the prices of household goods. Finally, the US jobs report came in better than expected with Fed’s Powell to testify in congress this week.
With the coronavirus concerns still very much the main headline, global indices point downwards at the start of the trading week following a Friday sell-off. The major averages all had their best performance also in the prior week with some making fresh highs despite the Friday drop, but the trend is clearly negative as we head into the new week.
The death toll from the new coronavirus outbreak has now surpassed that of the SARS epidemic which had taken place nearly two decades ago, as the number of deaths is above 900. Globally the number of cases now exceeds 40,000. With China being at the centre of the outbreak, cities in China are now in the third week of an almost complete shutdown and economic turmoil for global supply chains worsening.
The much discussed emergency meeting of OPEC+ ministers to respond to the drop in oil price due to lack of demand from China seems unlikely to happen at all. Russia has been resisting Saudi Arabian efforts to reduce production and seems to have rejected a proposal from OPEC to cut output by 600,000 barrels a day. A barrel of WTI Oil was trading at $50 at the time of writing.
The US economy on Friday had delivered another positive jobs report, with payrolls growth strong, unemployment low, and earnings continuing to increase. The solid payrolls represented the 112th straight month of job gains, an impressive record for an economy now more than 10 years into the present economic expansion.
The crypto market had made a bullish move over the weekend. With Bitcoin moved back above $10K and is now up more than 40% in 2020 and stands at its strongest level since September. The one-year high for Bitcoin is in the region $13,797. With the halving taking place in May and price in a bull run, we could see price testing the one-year high.
Looking ahead, it's set to be a busy week for monetary policy. Fed’s Chair Powell will testify to Congress on Tuesday and Wednesday. The testimony, will likely be a repeat of remarks from the January FOMC, traders will be alert for any surprises. The first RBNZ policy decision of the year is set to see rates left unchanged, while markets will also hear from ECB President Lagarde, BoE Governor Carney, BoC Governor Poloz, RBA Governor Lowe, and RBNZ Governor Orr throughout the week.
We could see adjustments made in the event of any clues on the policy outlook. Also on the data front, the US consumer will be in focus this week, with Friday's retail sales and consumer sentiment reports set to prove key leading indicators of the state of the US economic expansion along with the latest CPI figures.