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G7 Offers No Aid To Worried Markets, Coronavirus Is Still Spreading, Equities Lower Again

Equities Move Lower

The U.S. futures are indicating a slightly lower open on Tuesday. The major indices are looking at losses in the range of -0.10% after trading in a wild range during the overnight session. Today’s moves are spurred by the G7 and hope the group would announce some form of economic support. The G7 says it will act to support the economy but gave no details and disappointed hopeful traders.

The Reserve Bank of Australia announced it would cut rates by 25 basis points in the overnight hours. This puts the Australian benchmark rate at 0.50% and a record low. The RBA’s statement cited the coronavirus as a significant risk to the Australian economy. The CME FedWatch Tool shows the market is pricing in not one but three rate cuts by April. The odds are high for a 50 basis point cut this month with an additional 25 basis points next. The latest counts list more than 89,000 infected and 3,000+ dead with the virus still spreading.

Stocks On The Move

Travel & Leisure stocks are among today’s hardest hit. Shares of Carnival, Marriot, and Las Vegas Sands are all down about -0.50% in early trading. Shares of American Airlines are bucking the trend with a rebound of 4.5%.

UBS got an upgrade from Deutsche Bank based on valuation and shares advanced on the news. Kohl’s reported earnings this morning and beat on the top and bottom lines. Shares are up more than 3.0% on the news. Target and Autozone, however, are both moving lower in the premarket session. Target reports weaker than expected comps while Autozone’s mixed results and tepid outlook did not please investors.

Volatility Is On The Rise

The VIX has retreated from its recently set high but traders are not complacent. The fear-index is trading well-above ordinary levels and points to ongoing volatility in the market.

Volatility may be sparked again this week and there are a number of catalysts to do it. First and foremost is the coronavirus. The spreading virus and potential for economic impact are becoming very real and much larger than first thought. The UK estimates that up to 20% of the workforce could be out of work due to the cold by the time the pandemic has passed.

On the economic front, the Fed’s Beige Book stands the most chance for moving the market. A strong report could dash hopes for FOMC easing at the March meeting. A weak report will reinforce the idea the U.S. economy is threatened by the virus and raise the odds of future rate cuts. After that, the NFP and labor data will be the most closely watched.