News

Risk-Off Mood Prevails over Coronavirus Pandemic Fears

Equities

Major US stock index futures settled lower for the fifth straight day as the Coronavirus outbreak outside China continued to weigh on risk appetite. The virus spread is negatively affecting global business activity as it is hitting supply chains, production, and many more. The Dow Jones Industrial Average futures tumbled to 26468(down more than 3,000 points from February's peak), the S&P500 futures dropped to 3062, and Nasdaq declined to 8697. In Europe, Dax futures fell to 12362, while FTSE MIB recovered from 22637 to 23422 on the World Health Organization reported that cases in Italy are inflated due to testing errors

USD

The dollar index, which measures the greenback against a basket of major currencies, fell sharply to 98.67 amid growing chances for further monetary policy easing. The US Treasury yields crashed to record lows with the 10-year yields dropping as low as 1.283% as investors favored bond safety. The CME Fed Watch tool is currently showing a probability that the Fed will cut rates by 25 basis points in April, 25 basis points in June, and another cut in December. Market participants are looking forward to the second reading of the fourth-quarter GDP, January durable goods orders, and January pending home sales. The EURUSD soared to $1.0942, the GBPUSD trimmed losses and rose to $1.2946, and USDJPY tumbled to 109.85.

Metals

Gold prices inched higher as investors favored safe-haven assets to riskier ones. Equity markets continued their drastic decline, and US treasury yields extended move south, lowering the opportunity cost of holding non-yielding bullion. The price of a gold ounce rose to $1652, the price of a silver ounce rallied to $18.14, and palladium futures advanced to a fresh record high of $2776.

Oil

Oil prices plunged to their lowest levels since early January 2019 on demand concerns.  Market participants are taking into consideration that the spread of the Coronavirus is slowing down the global economic activity and will lower oil-demand levels. On the other hand, the US Energy Information Administration reported a pickup in weekly crude oil inventories by 0.452 million barrels last week. The West Texas Intermediate crude oil futures dropped to $47.85, and Brent futures fell to $52.59.

Major Economic Events

GMT Country Event Expectation Previous

10:00

EU

Consumer Confidence (Feb)

-6.6

-6.6

13:30

US

Core Durable Goods Orders (MoM) (Jan)

0.2%

-0.1%

13:30

US

GDP (QoQ) (Q4) 

2.1%

2.1%

13:30

US

GDP Price Index (QoQ) (Q4)  

1.4%

1.5%

13:30

US

 Initial Jobless Claims

212

210

15:00

US

 Pending Home Sales (MoM) (Jan)

2.2%

-4.9%

16:00

EU

ECB's De Guindos Speaks 

-

-

20:30

US

FOMC Member Mester Speaks 

-

-


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