Stock markets at record levels even with a spike in coronavirus cases
The stock market notched a second consecutive weekly gain and hit record levels, even as concerns about the coronavirus now called covid-19 still on investors’ minds. China made changes to its counting method for the coronavirus cases which led to a spike in reported cases and a larger death count then originally assumed.
Investors are unclear on how much the virus will weight on the global economy. Speeches from heads of central banks such aas Fed’s Powell, ECB’s Lagarde and RBNZ’s Gov Orr last week showing concerns and will continue to monitor its impact. A top infectious-disease scientist warns of a doomsday scenario where two-thirds of the world’s population could catch it.
Over the weekend the recent headline has pointed to the first death in Europe due to the virus. We are expecting oil to continue to be affected but also sectors such as airlines and cruise lines. Last week in politics, Boris Johnson had taken steps for further influence in government, with a cabinet reshuffle that forced the sudden resignation of his finance minister Sajid Javid.
The pound gained on the news as markets expect a sizeable fiscal stimulus that would be supportive of economic growth and lessen the chance of a rate cut by the Bank of England. Rishi Sunak is the new Chancellor of the Exchequer, this move has been described by political commentators as being a power play by Johnson’s office.
In other news, German Chancellor Merkel had helped support further weakness in the Euro with her protégé and heir to her role, Annegret Kramp-Karrenbauer sudden resignation. Germany had only recently climbed out of an industrial led weakness which caused them to fall into a recession. Currently China does matter for the Eurozone as it is an important trading partner and the impact of coronavirus’s impact on the Chinese economy will have a knock on impact in the Euro. Therefore, the markets are anticipating a cut to the ECB’s interest rate.
Cryptocurrencies continue to attract funds due to the continued uncertainty much like precious metals. At the time of writing, Bitcoin is above the big $10,000 level, while Ethereum is flying 20% higher. In a new report, a crypto focused research firm TradeBlock estimates the average cost to mine a single bitcoin could jump to $12,525 after the halving, expected in May.
That’s nearly double the average cost of $6,851 now. Essentially, miners will have to run twice the number of computations, with a corresponding increase in electricity usage, to get the same amount of bitcoin they’re getting now. Researchers at the U.S. bank JPMorgan Chase have described bitcoin miners’ average cost as the cryptocurrency’s intrinsic value.
This week markets will take a keen interest in the Coronavirus statistics being released as the recent adjusted counting methods led to a jump in cases and we can’t help but wonder how robust these counting methods accuracy is.
This pandemic is far from over, and contrary to what the stock markets think with fresh highs, we believe that this is still a clear danger. Macro data wise we have a few important prints namely CPI from the UK, Canada and the Eurozone, along with the all-important PMI releases and the FOMC minutes.
Here is the breakdown of what to expect this week:
Presidents’ Day – US markets closed
12.30am – RBA meeting minutes. Markets to watch: AUD crosses
9.30am – UK employment data: January claimant count to rise to 22,600, while December unemployment rate to hold at 3.8%. Markets to watch: GBP crosses
10am – German ZEW (February): economic sentiment index to fall to 15 from 26. Markets to watch: EUR crosses
1.30pm – US Empire mfg index (February): expected to fall to 4.5 from 4.8. Markets to watch: USD crosses
11.50pm – Japan trade balance (January): exports to fall 7.1% YoY. Markets to watch: JPY crosses
9.30am – UK CPI (January): prices to rise 1.3% YoY, and fall 0.8% MoM, while core CPI to rise 1.5% YoY. Markets to watch: GBP crosses
1.30pm – Canada CPI (January): prices to rise 2.2% YoY. Markets to watch: CAD crosses
1.30pm – US PPI, housing starts & building permits (January): PPI to rise 0.2% MoM, starts to fall 30% MoM and permits to be down 0.1%. Markets to watch: USD crosses
7pm – FOMC minutes: these will help explain the latest policy decisions. Markets to watch: USD crosses
12.30am – Australia employment data (January): unemployment rate to rise to 5.2% from 5.1%. Markets to watch: AUD crosses
7am – Germany GfK consumer confidence (March): forecast to fall to 9.8. Markets to watch: EUR crosses
9.30am – UK retail sales (January): sales to rise 0.6% MoM and 1% YoY. Markets to watch: GBP crosses
1.30pm – US initial jobless claims (w/e 15 February), Philadelphia Fed index (February): claims to rise to 217K from 205K, while the Philly Fed index falls to 10. Markets to watch: USD crosses
3pm – eurozone consumer confidence (February): confidence to rise to -8 from -8.1. Markets to watch: EUR crosses
4pm – US EIA crude inventories (w/e 14 February): stockpiles to fall by 1.6 million barrels. Markets to watch: Brent, WTI
8.15am – 9am – French, German, eurozone PMIs (February, flash): these will provoke plenty of interest, and potential volatility, in eurozone assets. The German manufacturing PMI is expected to fall to 44.8 from 45.3, while the eurozone manufacturing PMI drops back to 47.5 from 47.9. Markets to watch: eurozone indices, EUR crosses
9.30am – UK mfg & services PMIs (February, flash): mfg PMI to rise to 50.6 from 50, while the services PMI falls to 52.2 from 53.9. Markets to watch: FTSE 100, FTSE 250, GBP crosses 10am – eurozone CPI (January): prices to fall 1.1% MoM. Markets to watch: EUR crosses
2.45pm – US mfg & services PMI (February, flash): manufacturing PMI to fall to 50.2 from 51.9 and services to fall to 52 from 53.4. Markets to watch: US indices, USD crosses
3pm – US existing home sales (January): expected to fall 2.2% MoM. Markets to watch: USD crosses