• Dr Akela

Markets running out of steam

What's New

. The stock market rally appears to have run out of steam as coronavirus toll climbs, with Asian markets falling on Friday and oil price gains stalling. The death toll from the epidemic in mainland China reached 636 as of the end of Thursday, up by 73 from the previous day. The death toll in mainland China from the new virus has more than doubled in just under a week. There were 3,143 new confirmed infections, bringing the total so far to 31,161.

. China's economy could be disrupted in the first quarter due to the coronavirus outbreak, but it is expected to recover once the virus is brought under control, a vice governor of the central bank said. Analysts believe China's first-quarter economic growth could slow sharply by 2 percentage points or more from 6% in the last quarter, but could rebound sharply if the outbreak peaks soon.

. In addition to the ample liquidity already provided by the PBoC, which is expected to be maintained, interest rate cuts and reforms remain in the agenda. Cuts in taxes and fees are also expected to boost confidence.

. The coronavirus could cause a 0.2% decline in Australian GDP in the current quarter, with its spillover effects seen larger than the 2003 SARS outbreak, according the RBA governor. Analysts see the Australian economy shrink in the first quarter of the year, the first contraction since 2011.

. It's not just Australia: Singapore's biggest bank, DBS, downgraded its forecast for the city-state's 2020 growth rate to 0.9% from 1.4% previously, citing an expected economic hit from the new coronavirus epidemic.

. Oil is up for the day but down for the fifth straight weekly, despite optimism that OPEC+ will deepen output cuts. OPEC+ is waiting for Russia to respond to a recommendation by a panel of experts from the coalition for additional supply curbs and the extension of current reductions until the end of the year. Oil majors including Total and BP are projecting a significant hit to global demand this year due to the virus, with Chinese consumption already cut by about a fifth since the outbreak.

. In currency markets, the Aussie's weekly gains were halted by the RBA governor's comments, with the SGD also suffering losses. Copper prices also dropped.

. Early today, Japanese spending data came out worse than expected, even though the country showed a positive reading of the "soft" leading and coincident indices. Most importantly, German exports came out worse than expected in December and industrial production dropped heavily as a result of the continuing world slowdown.

Up and Coming

. French and Spanish industrial production data re expected today, with the first forecast to show a contraction, while the second is expected to continue with an above-2% growth rate.

. In the UK, the Halifax House Price Index is expected to continue its strong increasing pace, with a 3% y/y forecasted growth rate.

. Big news is in the US today, with the NFPs forecast to beat last month's performance as the US private sector continues to remain strong. Unemployment is still expected to remain at very low levels.

. In Canada, employment is expected to have continued its positive change, with a 15K forecasted increase, compared to 32K in December.

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