News

US Stock Futures Plunge on COVID19 Outbreak; Gold Soars

Equities

Major US stock index futures kicked off the week on a gap lower amid growing virus concerns. The number of cases outside China picked up on the weekend, where Italy, Iran, and South Korea reported a total of 963 cases and 18 deaths. Market participants are concerned that further virus spread would weigh more on global economic activity. The Dow Jones Industrial Average futures dropped to 28334, the S&P500 futures declined to 3265.1, and Nasdaq futures tumbled to 9175. Meanwhile, the FTSE MIB index fell sharply to 24670.

USD

The dollar index, which measures the greenback against a basket of major currencies, recovered partially from Friday's losses rising to 99.64 as investors favored dollar safety. The surge in Covid19 cases outside China over the weekend raised investors' concerns that this could turn into a pandemic that would disrupt the global economic activity. Market participants assessed the strength of the US economy and its resilience to headwinds relative to other rival economies. As a result, the dollar gained against peers where the AUDUSD tumbled to 0.6584, the NZDUSD declined to $0.6303, and the EURUSD trimmed gains to trade at $1.0804. On the other hand, the US treasury yields extended declines to record lows, as investors rushed to bond safety. The CME Fed Watch tool is currently showing an elevated chance of an interest rate cut in April.

Metals

Gold prices soared to their highest levels since January 2013 as investors rushed to safety. The escalating virus woes weighed on investors' risk appetite and forced them to jump to safety assets. Moreover, the decline in US Treasury yields lowered the opportunity cost of holding non-yielding bullion. The price of a gold ounce rose to 1686, the price of a silver ounce rallied to $18.84, and palladium held steady above $2700.

Oil

Oil prices declined as the Covid19 outbreak revived demand concerns. The virus spread is negatively affecting economic activity worldwide. Therefore, softer economic growth would lessen the oil demand levels for 2020. Meanwhile, market participants are hoping for an output cut by OPEC+ next month. The West Texas Intermediate crude futures fell to $51.64, and Brent futures dived to $57.79.

Major Economic Events

GMT Country Event Expectation Previous

9:00

EU

German Business Expectations (Feb)

92.2

92.9

9:00

EU

German Current Assessment (Feb)

98.6

99.1

9:00

EU

German Ifo Business Climate Index (Feb)

95.3

95.9

13:30

CA

Wholesale Sales (MoM) (Dec)

0.5%

-1.2%


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