• Dr Akela

Markets Cautiously Optimistic

What's New

. Asian shares fell today as the death toll from a coronavirus outbreak exceeded the SARS epidemic of two decades ago. Still, Chinese shares gained as authorities lifted some work and travel restrictions, helping businesses to resume operations.

. At the same time, European stock markets are set move higher Monday, with traders having a cautious optimism outlook to the restarting of industrial activity in China. In general, markets are expected to be sensitive to virus headlines.

. China's central bank has taken a raft of measures to support the economy, including reducing interest rates and pushing more liquidity into the markets. From Monday, it will also provide special funds for banks to extend lending to businesses working to combat the virus.

. The Aussie, a liquidity proxy for the Yuan, rose 0.5%, after reaching a decade low earlier in the session. The currency has lost 4.5% this year.

. At the same time, the official daily update on the number of new infections in China reported fewer than 3,000 new cases for the first time since Feb. 2. On Monday, the latest daily number of reported new cases again topped that benchmark at 3,062. The global death toll from the coronavirus outbreak reached 910 (of which 908 in China) and the number of cases stood just above 40,000.

. In the US, data releases continue to be positive, with non-farm payrolls increasing by 225,000 jobs in January. On the other hand, euro area yields dropped after Germany's industrial production fell in December, its biggest fall since January 2009.

. Cyclical commodities are also reflective of the slowdown, with oil prices having dropped by 14% and copper being down around 10% since the outbreak of the virus on Jan. 17.

. Earlier today, Chinese CPI came out at 5.4%, beating expectations of 4.9%, even though this would most likely be a result of the yuan depreciation in January.

Up and Coming

. Nothing much on the data front today, with markets still hinged on virus news. Italian industrial production and sentix investor confidence are due today, with both expected to fare worse than the previous month.

. In Canada, housing starts are expected to improve to 205K vs 197K in the previous month, with building permits going back to positive rates.

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