18-Feb-2020

1) US Indices Open Lower After Holiday
2) As Equities Turn USD/JPY: Yen Finds Takers Red
3) Gold: Bulls Dominate Beyond $1585

1) US Indices Open Lower After Holiday

US indices slid this morning as investors assessed whether China’s stimulus efforts will be enough to counter the CoVid-19 threat. Oil prices rise further.

The US30 index was steady yesterday in holiday-thinned trade, but has opened weaker this morning

The 55-day moving average has risen to at 28,709 while the 100-day moving average is at 28,037

The NY Empire State manufacturing index probably rose to 5.0 from 4.8 this month, the latest survey shows. That would be the highest reading since May last year.

The Germany30 index looks set to snap a two-day rising streak today after it opened weaker following Wall Street’s cue

The index remains above the 55-day moving average at 13,352 while the 100-day average provides longer-term support below at 13,091

The February ZEW surveys for both Germany and the Euro-zone are due today, with Germany’s economic sentiment index expected to fall to 21.5 from 26.7 while the Euro-zone’s is seen improving to 30.0 from 25.6.

West Texas Intermediate (WTI) hit the highest level this month yesterday on hopes that the CoVid-19 news will start to improve

Oil prices are rising toward the 23.6% Fibonacci retracement of the January-February decline at $53.136

Tomorrow the American Petroleum Institute releases its weekly crude oil stockpiles data to February 14. Last week saw a lumpy increase in inventories of six million barrels.

2) As Equities Turn USD/JPY: Yen Finds Takers Red

The bid tone around the Japanese Yen strengthened in Asia, pushing USD/JPY lower from 109.90 to 109.70, possibly tracking the risk-averse mood in the equity markets.

The futures on the S&P 500 are currently reporting a 30% drop on the day. Meanwhile, stocks in South Korea and Hong Kong are currently shedding more than

1%. Major indices like Japan’s Nikkei and China’s Shanghai Composite are reporting a 1.2% and 0.30% drop, respectively.

Meanwhile, the yield on the US 10-year Treasury note is down nearly three basis points at 1.559%. The equity market losses and the uptick in the anti-risk Japanese yen could be associated with lingering concerns over the economic impact of the coronavirus outbreak in China.

While the number of new virus cases in mainland China fell below 2,000 on Tuesday for the first time since January, experts warned it is too early to say the outbreak has peaked.

On the contrary, the outbreak looks to be spreading fast in other nations. Notably, Japan’s infection rate has picked up since Feb. 12, doubling every four days, according to Jim Bianco, President of Bianco Research.

While China’s growth rate is widely expected to slow down sharply in the first quarter, the officials are not in favor of a big monetary stimulus.

As per MNI News, the officials have called for a cautious monetary policy response that would target affected sectors and avoid reversing the current overall neutral stance.

As a result, the equity market risk aversion could worsen, more so, as tech giant Apple said on Monday that it would not meet its revenue guidance for the March quarter due to slower iPhone production and weaker demand in China. All in all, the risk for USD/JPY looks skewed to the downside.

The pair has formed a big head-and-shoulders pattern on the hourly chart with the neckline support at 109.67. An hourly close lower would confirm a breakdown and open the doors to 109.21

3) Gold: Bulls Dominate Beyond $1585

Gold prices remain 0.33% positive to stay mildly above $1586 during early Tuesday. The yellow failed to extend the previous day’s declines as the market’s fear wider than a registered outbreak of China’s coronavirus. Concerns about the deadly epidemic have also been raised by the key global institutions off-late.

Joining the league of International Monetary Fund (IMF) and World Trade Organization (WTO), the Reserve Bank of Australia’s (RBA) minutes statement recently cited coronavirus risk as material to China and thus to Australia.

Earlier, WTO’s Goods Trade gauge dropped to 95.5 in February from 96.6 in November, well below the index’s baseline of 100. Following the release, the institute mentioned that every component of the Goods Trade Barometer will be influenced by the economic impact of COVID-19 and the effectiveness of efforts to treat and contain the disease. Prior to that, the IMF’s Managing Director Kristalina Georgieva said that the China coronavirus outbreak (COVID-19) could have a significant impact on the world economy if it is not contained soon while hinting that the IMF could cut the global growth outlook over the virus outbreak.

As per the latest statistics, China registered 1,886 new cases of coronavirus and 98 new deaths as of Feb 17. On the other hand, Hubei marked new 1.807 infected cases as well as 93 deaths on February 17. Even if the recent statistics show a sign of receding pace, the Caixin raised the doubts over the official figures.

It’s worth mentioning that the coronavirus infection rate in Japan is doubling every four days and has picked up since February 12.

To portray the broad risk-off, the US 10-year treasury yields decline more than two basis points to 1.564% whereas S&P 500 Futures also weaken 0.22% to 3,373 by the press time.

Investors will now focus on how the US traders will respond to the recent coronavirus updates while returning from the long weekend. On the economic calendar, the Empire State Manufacturing Index for February, expected 5.0 versus 4.8 prior, can please momentum traders.

Gold prices are all set to challenge the monthly top surrounding $1,594 while also targeting $1,600 round-figure. However, a downside break of a two-week-old rising support line, at $1,573 could trigger fresh pullback towards the sub-$1,550 area.