INSIGHTS

Duncan Donald

Mon, Feb 10


US earning season continues to impress, but what impacts will the Coronavirus have on the future.

As cases of Coronavirus continue to grow in China with the number affected more than doubling week on week from 17,000 last week to 40,171 at the time of writing. With 910 deaths caused directly by the virus, global fears are heightening. Comments from the World Health Organisation (WHO) showed increasing concern of global contagion after a Brit who had recently travelled to Singapore directly infected people from 3 separate European countries.

 

This morning we heard that China is to offer special lending services to support companies who are suffering from the shutdown as the country actively tries to stem the spread of infection. With no tangible cure or treatment becoming evident concerns over the pace and scope of the virus are of great concern.

 

As earning season brought great comfort to the US stock market as companies like Tesla soared the US markets recorded their strongest week since November 2018. A question has to be asked over the long-term impacts of the virus, with the emphasis being more on how much of an impact there will be than if. For now, though, there is no shortage of buyers of any dip the markets show us. However, as always for a truer gauge of market health, the fixed income markets show us the way as Treasuries remain popular in a market wary of the damage of the virus. The same can be said in FX with the Swiss Franc and Japanese Yen and of course gold showing a strong week of appreciation, especially into the weeks close. 

 

Another reason we saw a pullback in the stock markets on Friday afternoon was strong data in the form of Non-farm Payrolls, such positivity will give the Federal Reserve of the US more cause for though over signalling future rate cuts. We won’t have to wait long to hear the thoughts of the Fed as on Wednesday and Thursday this week Jerome Powell testifies at the Senate, should he choose to manage rate cut expectations that could weigh heavy on the stock markets. 

 

GBP/USD was one of the worst performers of last week, as a soaring Dollar and a Pound which seems to be struggling under the monumental task of global trade deal negotiations. One of the first and most significant for the UK is the negotiation overfishing rights with EU countries, and already the strain of the relationship between the recently divorced parties are showing. Tuesday brings a great deal of significant data for the UK with headline GDP, Industrial Production and Manufacturing data all coming at 9.30 where a weak showing could well leave the Pound languishing below the 1.3000 level broken last week for some time to come. 

 

Elsewhere, we get the interest rate decision from New Zealand’s RBNZ early on Wednesday morning. With the close economic links between the countries of China, Australia and New Zealand there is evident downside pressure on all currencies and whilst it may not be imminent, it's expected lower rates will soon be on the radar. 

 

The Week Ahead

Monday:

  • Inflation Rate - China

Tuesday:

  • GDP Growth – UK
  • Unemployment Rate - UK

Wednesday:

  • Industrial Production - Eurozone

Thursday:

  • Inflation Rate – Ger
  • Inflation Rate - US

Friday:

  • GDP Growth – Ger
  • GDP Growth – Eurozone
  • Retail Sales – US
  • Industrial Production – US
  • Manufacturing Production – US
  • Michigan Consumer Sentiment – US

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