The Weekly Wrap – The EUR and Yen Come Out on Top as the Equity Markets Hit Corrective Territory

The Stats

It was a relatively busy week on the economic calendar, in the week ending 28th February.

A total of 56 stats were monitored, following the 72 stats in the week prior.

Of the 56 stats,  26 came in ahead forecasts, with 21 economic indicators coming up short of forecast. 9 stats were in line with forecasts in the week.

Looking at the numbers, 25 of the stats reflected an upward trend from previous figures. Of the remaining 31, 25 stats reflected a deterioration from previous.

For the Greenback, it was a particularly bearish week, as the markets reversed bets that the U.S economy would be unscathed from the spread of the coronavirus.

Not only did economic data continue to disappoint, but the markets also raised the probability of multiple rate cuts by the FED.

When gold takes a tumble as investors look for liquidity to meet margin calls, it’s never a good thing…

The Dollar Spot Index fell by 1.21% to end the week at 98.132.

Out of the U.S

It was a quiet first half of the week, with economic data limited to February consumer confidence figures.

A slight uptick in consumer confidence had a muted impact on the dollar on Tuesday.

Market risk aversion and updates from the U.S on the coronavirus pinned the Dollar back early in the week.

In the 2nd half of the week, durable goods orders on Thursday also failed to impress ahead of a busy Friday.

While core durable goods orders rose by 0.90% in January, durable goods orders fell by 0.2%, sending mixed signals to the market.

At the end of the week, the annual rate of inflation continued to fall short of the FED’s 2% objective.

Personal spending rose by just 0.2% in January, which was softer than a 0.4% rise in December.

Chicago PMI numbers were somewhat better than anticipated, however, with the PMI rising from 42.9 to 49.0.

The February numbers suggested that next week’s ISM numbers may not be as dire as the Markit PMI numbers.

It wasn’t enough to support the U.S equity markets or the Dollar, however.

Housing sector numbers and 2nd estimate GDP numbers for the 4th quarter had a muted impact in the week.

In the equity markets, the Dow slumped by 12.36%, with the S&P500 and NASDAQ tumbling by 11.49% and by 10.54% respectively.

Out of the UK

It was a particularly quiet week on the economic calendar.

There were no material stats to provide the Pound with direction.

The lack of stats left the Pound in the hands of Brexit chatter as the EU and Britain prepare to return to the negotiating table.

A visit to $1.30 levels early in the week was brief, with the British Prime Minister spooking the markets once more.

Johnson spoke on Thursday, stating that Britain would walk away from negotiations should there be a lack of progress by the end of June.

With so much to iron out and the 2-sides worlds apart, hopes of having a framework in place by June are slim…

In the week, the Pound fell by 1.09% to $1.2823, with the FTSE100 ending the week down by 11.12%.

Out of the Eurozone

It was a relatively quiet start to the week economic data front.

Germany was in focus, with February IFO Business Climate Index figures and 2nd estimate GDP numbers in focus.

On the positive side for the EUR was a slight pickup in the Business Climate Index. This came off the back of a rise in optimism, as the current assessment index eased back.

Ultimately, however, March numbers will give a better indication of whether the coronavirus has affected business sentiment.

With GDP numbers in line with 1st estimates, the focus then shifted to a busy Friday.

Key stats included French consumer spending and German unemployment numbers.

While Germany’s unemployment rate held steady, French consumer spending took a hit in January. The slide came ahead of the coronavirus news, which suggests that a further pullback in spending could be on the cards.

The stats failed to influence, however, as the markets punished the Dollar through much of the week.

Prelim inflation figures out of Spain and France, French GDP numbers and finalized consumer confidence figures out of the Eurozone also failed to move the dial…

On the monetary policy front, ECB President Lagarde spoke late in the week. She was of the view that the virus had yet to impact inflation to the point where the ECB needs to step in…

That is in stark contrast to the outlook towards FED monetary policy…

For the week, the EUR rose by 1.65% to $1.1026.

For the European major indexes, it was a particularly bearish week. The DAX30 tumbled by 12.44%, with the CAC40 and the EuroStoxx600 ending the week down by 11.94% and 12.25% respectively.

Elsewhere

It was a particularly bearish week for the Aussie Dollar and the Kiwi Dollar.

In the week ending 28th February, the Aussie Dollar slid by 1.69% to $0.6515, with the Kiwi Dollar down by 1.62% to $0.6246.

For the Aussie Dollar

It was a relatively quiet week for the Aussie Dollar on the economic data front.

Key stats included 4th quarter construction work done and private new CAPEX figures on Wednesday and Thursday.

Both sets of figures disappointed, though a 2.8% slide in new CAPEX in the 4th quarter was more alarming.

RBA monetary policy has not only been in favor of consumer spending but also business investment. The slide suggests a lack of confidence and raised the prospects of a near-term rate cut.

On Friday, the private sector credit figure also failed to impress, with total credit rising by just 0.3% month-on-month.

With the numbers skewed to the negative, risk aversion added to the downside in the week.

Negative sentiment towards the economic outlook led to a slide in commodities and commodity currencies.

For the markets, uncertainly over when the spread of the coronavirus will abate also influenced.

For the Kiwi Dollar

It was a relatively quiet start to the week on the economic colander.

4th quarter retail sales figures failed to impress at the start of the week, with sales rising by 0.7%. In the 3rd quarter, retail sales had risen by 1.7%.

Later in the week, trade data and business confidence figures delivered mixed results that added pressure on the Kiwi.

While trade exports to China rose further, January’s trade was not impacted by China’s shut down.

Business confidence figures, however, suggested some doom and gloom ahead.

With exports to China accounting for 27% of total New Zealand exports in January, it could be quite dire reading next month…

For the Loonie

It was a busy week on the economic calendar. Key stats included wholesale sales figures on Monday and RMPI and GDP numbers on Friday.

A rise in wholesale sales in December failed to provide support at the start of the week, as crude oil prices got hammered.

Market fears of a marked slowdown in the global economy, stemming from the spread of the coronavirus, weighed.

At the end of the week, with the Loonie already under the cosh, GDP numbers also failed to support.

While the economy fared better in December, there was a marked slowdown in the 4th quarter. When considering the economic disruption anticipated in the 1st quarter and beyond, it doesn’t look good.

RMPI numbers also failed to impress, with the RMPI falling by 2.2% in January, reversing most of a 2.7% rise in December.

With the BoC in action next week, the chances of a rate cut certainly jumped in the week…

The Loonie slid by 1.38% to end the week at C$1.3407 against the Greenback.

For the Japanese Yen

It was a relatively quiet week on the data front.

The markets had to wait until Friday for key stats that had little to no influence on the Japanese Yen.

For the Government, the impact of the coronavirus on consumer spending is a blow following last year’s sales tax hike. That suggests that government support is likely to come.

In the meantime, however, retail sales fell by 0.4% in January, following a 2.6% slide in December.

The annual rate of core inflation also eased, with the Ku-area seeing core inflation easing from 0.7% to 0.5% in February.

With the jobs/applications ratio falling from 1.57 to 1.49, the only bright data set was industrial production.

A 0.8% rise in production in January was of little consolation, however, when considering the anticipated drop in demand.

Risk aversion ultimately drove demand for the Yen in the week, with concerns over the U.S economy restoring the Yen’s position as the “go-to” currency.

The Japanese Yen surged by 3.33% to end the week at ¥107.89 against the U.S Dollar. Risk aversion in the week weighed heavily on the Nikkei, which slumped by 9.59%, leaving the index down by 8.89% for February.

Out of China

There were no material stats to provide direction ahead of private sector PMIs on the weekend.

A lack of stats left updates on the coronavirus to provide direction that was ultimately positive for the Yuan.

In contrast, the sell-off across the global stock markets weighed on the CSI300 and Hang Seng, though they did fare better than the pack.

The CSI300 fell by 5.05%, with the Hang Seng falling by 4.32% in the week.

In the week ending 28th February, the Yuan rose by 0.50% to CNY6.9920 against the Greenback.

The S&P 500 Enters Correction, Coronavirus Fear Grows, Consumer Data Still Solid

The U.S. Market Is Down In Early Trading

The U.S. index futures are down hard again in Friday trading. This is the 7th day of decline and puts the major indices deep in correction territory. The Dow Jones Industrial Average, S&P 500, and NASDAQ Composite are all down more than 10% in that time.  The Dow Jones Industrial Average fell nearly 1200 points in Thursday action, its biggest one-day drop on record. This has been the worst week for equities since 2008 and the pain is not yet over.

The sell-off was sparked by the coronavirus and the market’s realization it will have a profound impact on global GDP this year. Yesterday’s warning from Goldman Sachs, that EPS growth would fall to 0% or lower, is the prime example. In virus news, the spread of the virus is not contained. New Zealand and Nigeria have reported their first cases while China and South Korean totals continue to rise. South Korea is now the center of the spread with 500 new cases. China’s epidemic appears to be slowing with only 327 new cases.

The virus is expected to gain a foothold in the U.S. and may already have done so. California reported its first case of community-based transmission and now has roughly 8,500 hundred people under observation.

 Stocks On The Move

Caterpillar is the worst-performing stock in the Dow. The bellwether of global economic activity was down as much as 3.0% in early pre-market trading but cut the losses to only -2.0% by the open of the session. Shares of Apple were also down about 3.0% in early trading while Chevron and Cisco both posted losses near 2.0%. Hard-hit S&P 500 stocks include Norweigan Cruise Lines and American Airlines are moving lower in today’s session and down more than 20% since the broad-market sell-off began.

Paypal is the latest to issue a warning about the virus. The global payments company says revenue will be impacted by the virus because the cross-border activity is slowing. Paypal says revenue will come in at the lower end of the previously stated range and below consensus.

Consumer Data Remains Strong

The day’s economic calendar is topped by the Personal Income and Spending data. The report shows income rose by a larger than expected 0.6% while spending increased only 0.2%. Analysts had been expecting income to rise by about 0.3% and spending the same. Looking in the rearview mirror, the previous month’s income was revised down by 0.1% while spending was revised higher. On the inflation front, PCE prices rose 0.1% last month and are up 1.7% YOY. At the core level, consumer inflation is up 1.6% from last year.

The Technical Chart for this Index Points to More Losses for Equities

Major global equity indices carry a strong enough correlation to warrant keeping an eye on them for potential signals for the overall markets. The UK FTSE 100 (UKX) has made a notable downside technical break that signals a bigger shift might be taking place in the markets after an already unusually large decline in the last week of February.

Technical Outlook for the FTSE 100

Specifically, the index has broken down from a rising trend channel that had encompassed price action over the last 11 years.

FTSE 100 (UKX) Monthly Chart

The monthly chart above shows the rising trend channel and the downside break as a result of this week’s price action. Further, the index shows two distinct sequences of lower highs and lower lows.

FTSE 100 (UKX) Weekly Chart

The above weekly chart shows one series of lower highs and lower lows from the peak posted in July last year. A second series, of a larger degree, can be seen from the peak printed in 2018 near the 7900 price point.

To sum up there are four things that have caught my attention from these charts. The two distinct sequences of lower highs and lower lows, the downside channel break, and lastly, the downward momentum as a result of the price action in the last week of February.

Fundamental Outlook

UK fundamentals don’t necessarily support a sharp decline in the British index. Major economic data as of late has surprised to the upside which allowed the Bank of England to remain on hold in February after having considered cutting interest rates.

At the same time, the recent escalation in Coronavirus fears might shift the central bank back towards the prospect of monetary policy easing which generally would be supportive for equities.

But the Coronavirus itself presents a tremendous amount of uncertainty, especially after it became apparent in the past week that China is not doing well to contain it.

Members of the European Central Bank and the Federal Reserve this week did not appear to see the urgency in the virus threat this week in the same manner that the markets have. Comments from officials followed mostly the same rhetoric, that it was too soon to assess if a monetary policy adjustment will be required. Meanwhile, the Fed Funds futures show that the markets have fully priced in a US rate cut in March and are starting to price in a potentially larger 50 basis point cut.

Bank of England Governor Mark Carney took a more cautious approach in an interview with Sky News and acknowledged that the virus has led to a decline in tourism and is impacting businesses that rely on supply chains originating from China. However, he did not discuss whether UK policymakers were considering monetary policy easing.

Correlations in the Global Markets

Correlations in Major Equity Indices

The above charts show that the major indices – FTSE 100, Euro Stoxx 50, Dax 30, Nikkei 225, and the S&P 500 have a fairly strong correlation with each other. It can be argued the US index is much stronger compared to the others and the correlation is not as strong.

It is very much possible that a divergence takes place, considering that the UK is about to begin trade negotiations with the EU, although this is not something I would personally count on.

As a result of these correlations, my view is that the bearish signal in the FTSE 100 is pointing to more downside to come for the global equity markets.

Bottom Line

While it could be entirely possible that the UK index is forming a bear trap, I’m taking a much more cautious approach when it comes to equities. I think it is a dangerous time to try and catch the falling knife in stocks, even though it may have worked for some in the past. Rather, I think it’s best to sit on the sidelines and let things develop and revisit getting long equities once there is more clarity surrounding the virus and its potential impacts.

Global Shares Routed as Investors Ditch Risky Assets on Fear of Worldwide Recession

The major European stock indexes are trading sharply lower on Friday after entering correction territory the previous session, after falling 10% below the record highs seen on February 19. This follows steep sell-offs in seven major Asia-Pacific markets and the United States, which have also reached correction territory.

It took just six days for the benchmark S&P 500 and NASDAQ Composite Indexes to fall from record highs into correction territory. On Thursday, the blue chip Dow Jones Industrial Average plunged 1,200 points, its biggest one-day drop ever.

In Europe, at 11:44 GMT, the UK’s FTSE 100 Index is trading 6602.33, down 194.07 or -2.86%. Germany’s DAX Index is at 11974.17, down 393.29 or -3.18% and France’s CAC is trading 5354.27, down 141.33 or -2.57%.

Global Stocks Set for Worst Week Since 2008 Financial Crisis

World share markets were headed for their worst week since the depths of the 2008 financial crisis as investors ditched risky assets on fears the coronavirus would become a pandemic and trigger a global recession, Reuters said.

Hope that Fed Comes to the Rescue

Hopes that that the epidemic that started in China would be over in a few months and economic activity would return to normal have been shattered, as new infections reported around the world now surpass those in China.

Hope remains, however, that the U.S. Federal Reserve would cut interest rates as soon as next month to support economic growth.

“We don’t even need to wait for economic data to wee how badly the economy is being hit. You can tell that the sales of airlines and hotels are already falling by a half or something like that,” said Tomoaki Shishido, senior economist at Nomura Securities.

“It is fair to say the impact of the coronavirus will be clearly much bigger than the U.S.-China trade war. So the Fed does not have a reason to take a wait-and-see stance next month,” Shishido said.

Expectations the Fed will cut interest rates to cushion the blow are rising in money markets. Analysts say Fed funds futures are now pricing in about a 75% chance of a 25-basis point cut at the central bank’s March 17-18 meeting.

Fear of Major Global Economic Slump

Fear of a major economic slump is driving commodity and equity prices lower.

Fear as measured by the CBOE volatility index or VIX, jumped to 39.16, the highest level in about two years, well out of the 11-20 range of recent months, according to Reuters.

The index, which measures expected swings in U.S. shares in the next 30 days, typically shoots up to around 50 when bear market selling hits is heaviest and approached almost 90 during the 2008-09 financial crisis, Reuters wrote.

“The coronavirus now looks like a pandemic. Markets can cope even if there is a big risk as long as we can see the end of the tunnel,” said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities. “But at the moment, no one can tell how long this will last and how severe it will get.”

Virus Fears Scuttle Market, EPS Growth In Question, Data Still Holding Up

Equities Fall In Fourth Day Of Viral Rout

The U.S. futures market is indicating another deep decline on Thursday. The move, sparked by a growing fear of the coronavirus, shaved another -1.0% and more off of the major indices. Today’s news includes word of the first community-spread case of coronavirus in the U.S. Health officials in California report the first case in which there is no known trail of contagion. The news raises the stakes in terms of economic impact, if the U.S. shuts down like China and other countries global GDP could contract sharply in 2020.

Elsewhere in the world, China continues to report new cases despite signs its containment efforts are starting to pay off. In South Korea, the second hardest nation, the number of new cases spiked to set a new daily record. The disease is not yet contained in that country. Officials in Japan are taking precautionary efforts and have closed all schools, the number of cases is growing in the EU as well.

Stocks On The Move

Tech is among the days hardest hit. The sector has above-average exposure to China and international markets making it particularly vulnerable to the disease. Apple and Intel are among the days leaders but are not the biggest losers by far. Apple and Intell are both down about -1.5% while chipmakers NVDA and AMD have shed -2.5% and -3.9% respectively.

Microsoft and Goldman Sachs are the latest to issue warnings about the viral impact. Microsoft says it will not meet its Q1 revenue targets because the supply chain is re-ramping slower than expected. Goldman Sachs analysts issued a warning that EPS growth for the entire S&P 500 could come in well below expectations for the year, as low as 0.0% but I think their estimate is generous.

Best Buy issued a Q4 earnings report this morning. The company reports better than expected revenue and earnings that were driven by an increase in comp-store sales. Shares were up sharply following the news but have since given up their gains. Virgin Galactic got a major catalyst from analysts this morning. A double-dose of downgrades from Morgan Stanley and Credit Suisse have shares down more than -13.0%.

The Data Is Good, No Indication Of Weakness

The number of new claims for unemployment insurance climbed 8,000 over the last week but remains low and trending near historic lows. The continuing claims and total claims figures, both indicators of conditions within the broad labor market, were relatively flat over the past week. New orders for durable goods fell -0.20% over the past month. The figure is better than expected and accompanied by a double-digit increase in core capital goods orders. On the GDP front, the final read for 4th quarter GDP is 2.1% and unchanged from the previous estimate.

Equities Attempt Rebound, Coronavirus Spreading, 2020 Growth In Question

The U.S. Futures Edge Higher

The U.S. futures are edging higher in early Wednesday trading following two days of massive declines. The broad market made its biggest drop in over four years over the course of Monday and Tuesday. The Dow Jones Industrial Average, S&P 500, and NASDAQ Composite are all looking at opening gains in the range of 0.10% to 0.15%. Although early action looks bullish, traders are warned not to read too much into the move. The Coronavirus is still spreading and its impact on global economic activity only now being felt.

China reports an additional 406 cases in the overnight session with 52 more dead. South Korea says it has 169 new cases and a rising death toll as does Italy. France now reports its first case proving the virus can spread despite the best efforts of health officials. In the U.S. officials report over 50 cases, they are prepping the public for an epidemic the only questions are when it will start and how long it will last. Regardless, the economic impact of this event will be wide-ranging and long-lasting.

Stocks On The Move

The tech sector is trying to move higher in early trading despite its entering correction territory. Now down 10% from recent highs the sector is on the verge of a full-blown bear market. Shares of Apple are among the leaders, down -12% in the last two days, but up about 0.4% in early action.

Shares of Office Depot are among today’s hottest issues. The company reported better than expected results and positive guidance that lifted shares 5.0%. Shares of TJX, parent of the TJMaxx chains of apparel stores, are up more than 6.15% after it reported better than expected earnings. The company says comps rose 6.0% sparking a similar rise in share prices.

Fast-food retailers Papa John’s and Wendy’s are both moving lower. Both companies reported better than expected results due to strength in the U.S. consumer. the downside is outlook failed to impress and that has investors second-guessing their positions.

Volatility Is On The Rise

The VIX, a so-called “fear gauge”, spiked over the last two days. The index, a measure of options prices relative to the S&P 500, has reached levels above 25 and is fast approaching a two-year high. The index shows a high degree of demand for options, protection against a market downturn, and that spells lower prices for the S&P 500.

On the economic front, New Home Sales are due out later in the session. Sales are expected to rise from the previous month and may top estimates. Warmer than expected weather has had a positive impact on other housing data.

 

S&P 500 Rebounds, A Correction Is Coming

Equities Up In Early Trading

The U.S. futures are trading higher in the pre-market session although earlier gains have been muted. The Dow Jones Industrial Average, S&P 500, and NASDAQ Composite are all indicated up about 0.15%. The rebound comes a day after the broad market shed more than -3.0% in one of the deepest sell-offs of the last three years. Although the market tends to close higher following sell-offs of this type, traders are warned this correction is not over. Monday’s decline is only the first wave of selling now that the market accepts the coronavirus will hurt global economic activity this year.

The virus is now spreading in areas outside of China. South Korea reports more than 800 infected while Italy and Iran report 7 and 12 deaths each. The very real risk is that global GDP growth will fall below 0% for the first quarter and throw off estimates for the entire year. There have already been a number of downgrades from key S&P 500 companies, expect this trend to accelerate the longer the virus threat persists. South Carolina’s port system is reporting a sharp drop in deliveries that will hurt the state’s revenue this year. Add in the impact to the business supply chain and the threat of economic spillover becomes very real.

Stocks Making Headlines

United Airlines and MasterCard are the latest to issue warnings due to the virus. Both companies say the economic impact will be a drag on full-year revenue. Although business fundamentals are sound, a slowdown in cross-border travel, consumer and business spending is in process. United Airlines is down about -0.40% while MasterCard fell a more robust -2.0%. Chipmaker Micron is also moving lower, down about -1.0%, after it received a downgrade to underperform.

Home Depot is moving higher in early trading. The home improvement company beat on the top and bottom lines. The company CEO says investments in the company’s future are paying off. Shares are up 3.0%. Shares of Moderna are also on the move, up more than 15%, after the company shipped a coronavirus vaccine for Phase 1 trial. Moderna uses RNA technology to force human bodies to create their own medicines.

Economic Data Is Sparse

Today’s economic calendar is sparse. The only major release for U.S. markets is the Consumer Confidence figures due out later today. With the coronavirus weighing on global outlook this data will be more important than ever. The consumer has long been a driver of the U.S. economy, if cracks begin to appear the market correction could gain momentum.

Equities Plunge, Coronavirus Spreads, A Major Correction Has Begun

The U.S. Futures Are Down Sharply In Early Trading

The U.S. futures market is down sharply in early trading. Market participants have begun to understand the scale of disruption the spreading coronavirus will have on economic activity. The Dow Jones Industrial Average, S&P 500 and NASDAQ Composite are all down -2.5% to -2.75% in early trading.

The cause, news the coronavirus is not only spreading but gaining traction in areas outside of China. South Korea says the number of cases there has jumped to over 750. South Korea’s response was to raise its safety warning to the highest level. Elsewhere, the number of infected is growing in Italy and Iran. China says the number of deaths has topped 2,500 within its own borders. The last estimates for Q1 growth were near 0.0% due to viral impact but the risk is much greater. First-quarter growth is likely to come in below zero and the rebound expected later in the year is highly questionable.

Stocks On The Move

Oil and gold are among today’s biggest movers. Oil prices fell nearly -4.0% because spreading economic impact means declining demand or oil. Today’s move confirms resistance at a key technical level and may point the way to deeper declines later this quarter. Gold prices shot up nearly 2.0% and are headed up to retest the all-time high. Traders around the world are flocking into safe havens and are likely to drive the precious metal to new highs very soon.

Airlines, gaming, and travel stocks are leading equities lower. Shares of Las Vegas Sands, Wynn Resorts, and MGM are down -3 to -7.0%. Delta and American Airlines are both down about -5.25%. Chipmakers are not immune, Nvidia and Intel are both down as well, Nvidia leads with a loss of -6.0%. Apple and its supply chain are also being hit hard with losses in the range of -4.0% to -6.0%.

The U.S. Economy Is Still Strong

Words of encouragement from Warren Buffet did not assuage the market’s anxiety. He says the U.S. economy is still on fine footing and the data supports that view. Today’s economic calendar includes the Chicago National Activity Index which rose in January. The index came in at -0.25 from last month’s -0.51 showing an increase in overall activity and activity in line with long-running trends. Three of the four sub-indices improved but only one turned positive, the new orders. Traders should focus on new orders because it is a leading indicator of future activity.

The Week Ahead – Economic Data and COVID-19 Updates to Drive the Majors

On the Macro

It’s a relatively busy week ahead on the economic calendar, with 55 stats to monitor in the week ending 28th February. In the previous week, just 64 stats had been in focus.

For the Dollar:

It’s a busy week ahead for the Dollar.

The markets will have to wait until Tuesday, however, to assess the impact of COVID-19 on the U.S consumer, with the all-important CB Consumer Confidence figures for February due out.

FED Chair Powell had talked of economic resilience and with the U.S equity markets close to record highs, there’s little reason to expect any deterioration. Forecasts are Dollar positive.

The focus will then shift to January durable goods orders and 4th quarter GDP numbers due out on Thursday. Barring revision from 1st estimates, we expect the durable goods orders to have the greatest influence.

COVID-19 is expected to have a material impact on key economies. The markets will want to ensure that the U.S economy remains unscathed… After all, there remains a distinct difference between survey-based and actual data.

At the end of the week, January inflation and personal spending figures are due out along with the Chicago PMI for February.

Barring material deviation from prelims, we would expect finalized consumer sentiment numbers to be brushed aside.

Over the week, housing sector figures will also draw attention mid-week, with new home and pending home sales figures due out.

The Dollar Spot Index ended the week up by 0.21% to 99.337.

For the EUR:

It’s a relatively busy week ahead on the economic data front.

In the 1st half of the week, Germany is on focus once more. February’s IFO Business Climate Index numbers are due out on Monday, ahead of 2nd estimate GDP numbers on Tuesday.

While the IFO numbers will be the key driver, any revisions to the GDP numbers will have a greater impact…

In the 2nd half of the week, French consumer spending and GDP numbers are due out along with German unemployment figures on Friday.

Expect Germany’s unemployment numbers to have the greatest influence on the day.

Through the 2nd half of the week, prelim inflation figures for February will likely have a muted impact on the EUR.

The EUR/USD ended the week up down by 0.15% to $1.0847.

For the Pound:

It’s a particularly quiet week ahead on the economic calendar.

There are no material stats scheduled for release, which leaves the hand firmly in the hands of Brexit.

On 25th February, the EU is due to deliver its starting terms for trade negotiations that begin next week. France has already talked of a tough time ahead and Britain has been clear that there can be no strings attached.

Expect chatter on trade to be the key driver in the week. Economic data out of the UK impressed last week. That should remove the near-term focus on the BoE and monetary policy.

The GBP/USD ended the week down by 0.64% to $1.2964.

For the Loonie:

It’s a relatively busy week ahead on the economic calendar.

In a quiet 1st half of the week, however, economic data is limited to December’s wholesale sales figures due out on Monday. While the numbers will provide direction, the focus will be on GDP numbers due out on Friday.

Any weak numbers and expect the chances of a rate cut to rise, which should send the Loonie back to C$1.33 levels.

Outside of the stats, market risk sentiment will also be a key driver.

The Loonie ended the week up by 0.20% to C$1.3225 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

It’s a relatively quiet week ahead.

Key stats include 4th quarter construction work done and new CAPEX figures due out on Wednesday and Thursday.

While housing sector conditions have improved and are key to supporting consumer spending, CAPEX numbers will likely have a greater influence.

Business confidence has failed to bounce back at the turn of the year. Weak investment numbers will weigh on Thursday.

On Friday, private sector credit figures are unlikely to have a material impact on the Aussie.

Outside of the numbers, expect updates on COVID-19 to also provide direction.

The PBoC and Chinese Government have delivered support and will likely deliver more if the need arises. Will it be enough to support the RBA’s view that the impact of the virus will be short-lived?

The Aussie Dollar ended the week down by 1.30% to $0.6627.

For the Kiwi Dollar:

It’s a relatively busy week ahead on the economic data front. At the start of the week, 4th quarter retail sales figures will influence on Monday. The attention will then shift to January trade data and business confidence figures due out on Thursday.

Expect the retail sales and trade figures to have a greater impact, however.

On the trade front, there will be particular interest in export figures to China that are likely to have seen a sizeable decline.

In December, exports to China had accounted for 28% of NZ exports…

The Kiwi Dollar ended the week down by 1.38% to $0.6349.

For the Japanese Yen:

It’s a relatively busy week on the economic data. The markets will need to wait until Friday, however, for key stats.

Expect prelim January industrial production and retail sales figures to have the greatest influence.

Following some particularly dire numbers out of Japan last week, more doom and gloom should test the BoJ’s resolve…

Outside of the numbers, updates from China and the region on the coronavirus will also provide direction.  Expect any rise in cases within the region to weigh on the Yen.

The Japanese Yen ended the week down by 1.67% to ¥111.61 against the U.S Dollar.

Out of China

It’s a quiet week on the economic data front. Key stats are limited to February private sector PMI numbers that are due out on Saturday.

Outside of the numbers, chatter from Beijing and COVID-19 updates will continue to be the main area of focus.

The Chinese Yuan fell by 0.58% to CNY7.0271 against the U.S Dollar in the week.

Geo-Politics

Trade Wars: It’s simmering in the background. U.S President Trump may be quietly concerned over the impact of the coronavirus on his trade win against China… China is unlikely to meet any of the terms any time soon. With the Presidential Election campaign beginning to heat up, U.S farmers may not be getting the demand that Trump had promised…

Looking across to the EU, the Airbus v Boeing battle could send the EU into a trade dispute with the U.S. While hopes are of a resolution, progress on talks will need monitoring…

UK Politics: Terms of the EU’s starting point ahead of trade negotiations are due to be delivered on 25th February.

Expect plenty of reaction from Parliament and the markets from the terms that are likely to point to that tough time ahead…

Corporate Earnings

It’s a quieter week ahead on the corporate earnings calendar, as earnings season begins to wind down. Marquee names releasing earnings include:

From the U.S: Macy’s Inc. (Tue), JC Penny Co. Inc. (Thurs),

From of the UK: Standard Chartered PLC (Mon), Rio Tinto (Wed), British American Tobacco (Thurs), and International Consolidated Airlines Group SA (Thurs)

The Weekly Wrap – U.S PMIs and the Coronavirus Drive Risk Aversion

The Stats

It was a busy week on the economic calendar, in the week ending 21st February.

A total of 72 stats were monitored, following the 46 stats in the week prior.

Of the 72 stats, 39 came in ahead forecasts, with 24 economic indicators coming up short of forecast. 9 stats were in line with forecasts in the week.

Looking at the numbers, 27 of the stats reflected an upward trend from previous figures. Of the remaining 45, 36 stats reflected a deterioration from previous.

For the Greenback, it was a particularly bullish week, with risk aversion and positive economic data driving demand for the Dollar. That was the story until Friday when the Dollar hit speed bumps as private sector activity waned.

The Dollar Spot Index rose by 0.21% to 99.337, in the week.

Out of the U.S

In the 1st half of the week, key stats in the week included manufacturing numbers out of NY State and January wholesale inflation figures.

Any concerns over the impact of the coronavirus on U.S manufacturing sector activity would have eased. The Index jumped from 4.80 to 12.90 in February.

Wholesale inflationary pressures were also on the rise. Core producer prices rose by 0.5% in January, following a 0.1% rise in December. Producer prices also rose by 0.5%, following a 0.1% increase in December.

The focus then shifted to Philly FED Manufacturing and U.S prelim private sector PMI numbers for February.

On Thursday, the Philly FED Manufacturing Index jumped from 17.0 to 36.7 in February. Economists had forecast a fall to 10.0.

Private sector PMIs failed to impress on Friday, however.

The all-important U.S service sector contracted in February. According to prelim February figures, the Services PMI fell from 53.4 to a 76-month low 49.4.

Things were not much better for the manufacturing sector, with the PMI falling from 51.9 to 6-month low 50.8. As a result, the U.S Composite Output Index slumped to a 76-month low 49.6.

Friday’s numbers will have created some uncertainty over the U.S economic outlook that struggled in February. The ISM numbers will be key… Did the FED Chair get it that wrong?

On the monetary policy front, the FOMC meeting minutes from Wednesday had limited impact. FED Chair Powell’s testimony from last week was considered more current.

In the equity markets, the Dow fell by 1.38%, with the S&P500 and NASDAQ down by 1.25% and by 1.59% respectively.

Out of the UK

It was a busy week on the economic calendar.

In the early part of the week, employment and inflation figures provided direction.

In December, average wages plus bonuses rose by 2.9%, easing from 3.2% in November. While wage growth slowed, employment continued to rise at a solid clip in the final quarter. Employment rose by 180k in December, following on from a 208k rise in the 3-months to November.

A 5.5k rise in claimant counts in January suggests that the unemployment rate will hold steady at 3.8%.

On Wednesday, inflationary pressures picked up at the start of the year, with the annual rate of inflation accelerating to 1.8%.

While the stats were skewed to the positive in the 1st half of the week it was not enough to support the Pound, however.

In the 2nd half of the week, retail sales and private sector PMI numbers also impressed.

Core retail sales rose by 1.6% in January, with retail sales rising by 0.9%, the pickup coming in spite of rising consumer prices.

Wrapping things up on Friday, private sector PMI numbers delivered support to the Pound.

The Manufacturing PMI rose from 50.0 to 51.9, while the Services PMI fell from 53.9 to 53.3, leaving the Composite unchanged at 53.3.

Upbeat stats in the week further eased any expectation of a BoE rate cut near-term, leading the Pound back to $1.29 levels.

Outside of the numbers, Brexit chatter was also in focus as France looked to send a strong message of intent across the Channel.

Britain’s chief negotiator David Frost delivered Britain’s goals on Monday, while also stating that signing up to EU standards would defeat the purpose of Brexit. The comments came in response to warnings from the French government as the EU and Britain prepare to begin trade negotiations…

France’s warnings and Britain’s stance suggest a tough time ahead, which left the Pound in the red early in the week.

In the week, the Pound fell by 0.64% to $1.2964, with the FTSE100 ending the week down by 0.07%.

Out of the Eurozone

It was a quiet start to the week economic data front, with economic data limited to economic sentiment figures out of Germany and the Eurozone.

The numbers were skewed to the negative, with investor concerns over the effects of the coronavirus weighing.

The Eurozone’s Economic Sentiment Index fell from 25.6 to 10.4, with the German Sentiment Index falling from 26.7 to 8.7.

In the 2nd half of the week, however, the stats were skewed to the positive.

Consumer confidence seemed unaffected by the spread of the coronavirus. Germany’s GfK Consumer Climate Index fell by 9.9 to 9.8, with the Eurozone’s consumer confidence rising from -8.1 to -6.6.

At the end of the week, prelim private sector PMI numbers were also skewed to the positive.

Manufacturing sector activity picked up in February, with the Eurozone’s PMI hitting a 12-month high.

While the Eurozone’s Composite rose from 51.3 to 51.6, it wasn’t all smooth sailing, with new orders continuing to weigh.

Finalized inflation figures from member states and the ECB monetary policy meeting minutes had a muted impact on the EUR.

For the week, the EUR rose by 0.15% to $1.0847, with a 0.57% rally on Friday reversing losses from the week.

For the European major indexes, it was a bearish week. The DAX30 fell by 1.20% to lead the way, with the CAC40 and the EuroStoxx600 ending the week down by 0.65% and by 0.61% respectively.

Elsewhere

It was a particularly bearish week for the Aussie Dollar and the Kiwi Dollar.

In the week, the Aussie Dollar fell by 1.30% to $0.6627, with the Kiwi Dollar down by 1.38% to $0.6349.

For the Aussie Dollar

It was a relatively quiet week for the Aussie Dollar on the economic data front.

Key stats included 4th quarter wage growth numbers on Wednesday and January employment figures on Friday.

It was a mixed set of numbers, however. Wage growth continued to grow at a tepid pace of 0.5%, with the unemployment rate rising from 5.1% to 5.3%.

There was a 46.2k jump in full-time employment to limit the negative sentiment towards the Aussie Dollar on the day.

On the monetary policy front, the RBA Meeting Minutes added further pressure on the Aussie Dollar on Tuesday.

The rate statement released on 4th February had shown little concern over the likely effects of the coronavirus on the economy.

The minutes, however, sent a different message, with members also considering a rate cut at the meeting. All of this was in spite of the RBA expecting economic activity to pick up in the 2nd half of the year.

With the RBA minutes on the dovish side, risk aversion in the week added pressure on the Aussie Dollar. While numbers out of China showed the spread of the coronavirus slowing, cases elsewhere caused alarm.

For the Kiwi Dollar

It was a particularly quiet start to the week on the economic colander, with no material stats to provide direction.

A likely extended period of soft demand for goods from New Zealand weighed on the Kiwi Dollar in the week.

China’s measures to continue to contain the spread of COVID-19 is expected to weigh on demand for overseas goods.

In the 2nd half of the week, 4th quarter wholesale inflation figures on Thursday did little to support the Kiwi. Input price inflation eased from 0.9% to 0.1% in the 4th quarter. Economists had forecast an easing to 0.4%.

For the Loonie

It was a busy week on the economic calendar. Key stats included January inflation figures on Wednesday and December retail sales figures on Friday.

The numbers were mixed in the week, with a pickup in the annual rate of core inflation providing support mid-week.

Retail sales figures did little to impress, however, with retail sales stalling in December.

While the stats did provide direction, crude oil supply disruption provided support.

The Loonie rose by 0.20% to end the week at C$1.3225 against the Greenback.

For the Japanese Yen

It was a busy week on the data front.

At the start of the week, 4th quarter GDP numbers and finalized industrial production figures caught the markets off-guard on Monday.

In the 4th quarter, the economy shrank by 1.6%. Compared with the 4th quarter of 2018, the economy slumped by 6.3%.

Economic woes were attributed to the sales tax hike, typhoons, and the U.S – China trade war.

Of concern for the BoJ will be the fact that the contraction came before COVID-19 began to spread…

On Wednesday, trade figures were not much better, with Japan’s trade deficit widening from ¥154.6bn to ¥1,312.6bn.

While exports fell by 2.6% year-on-year, the numbers were not as bad as had been anticipated. February figures will give the markets a better idea of what impact the coronavirus has had on the Japanese economy.

At the end of the week, it was weak stats once more, however.

Japan’s Manufacturing PMI fell from 48.8 to 47.6, with the Services Sector PMI falling from 51.0 to 46.7.

Market jitters over the spread of the coronavirus weighed heavily on the Yen. Rising cases in Japan and the region led to the markets seeking safety elsewhere.

Economic data out of Japan suggested that there is more trouble ahead for the Japanese economy. Uncertainty over the coronavirus spread across the region was also a key driver to the Yen’s demise.

The Japanese Yen fell by 1.67% to end the week at ¥111.61 against the U.S Dollar.

Out of China

Economic data was on the lighter side in the week, with key stats limited to new loans for January.

New loans surged by CNY3,340.0bn in January, following a CNY1,140.0bn rise in December.

Outside of the numbers, the PBoC cut loan prime rates on Thursday, though not by the extent that the markets had anticipated.

The PBoC cut 1-year loan prime rates from 4.15% to 4.05%, with the 5-year LPR cut from 4.8% to 4.75%.

While the more modest cuts weighed on the markets on Thursday, updates on the coronavirus provided support. The number of cases in China was in decline in the week, with the number of deaths also falling.

Earlier in the week, fiscal and monetary policy support had given the Yuan a boost before a pullback to CNY7 levels against the Dollar.

The CSI300 rallied by 4.06%, while the Hang Seng slid by 1.82% in the week.

In the week ending 21st February, the Yuan fell by 0.58% to CNY7.0271 against the Greenback.

Equities In Retreat, GDP Growth In Danger, Fed Downplays Rate-Cut Outlook

The U.S. Futures Are Moving Lower

The U.S. futures are indicating a mildly lower open on Friday. The move comes a day after U.S. equity markets experienced an unexpected and deep intraday pullback. The pullback, most likely caused by a growing fear of the coronavirus, countered a new all-time high in the broad market and threatens to spark a deeper correction. The number of deaths in China has risen in the last 24 hours and signs are emerging the virus is still spreading. China now reports outbreaks within its prison system while South Korea says its confirmed cases are spiking.

Traders are becoming more and more concerned about 1Q GDP and EPS growth. The consensus is the virus will hold GDP growth at 0.0% for the 1st quarter and that will assuredly have an impact on Q1 EPS growth. Looking at the Chinese data, sales of autos fell more than 92% in the first two weeks of February signaling the impact on economic activity could be quite severe. The good news is that, once the epidemic has passed, GDP and EPS growth are expected to rebound.

Wall Street Is Still Bullish On Domestic Equities

In corporate news, earnings and upgrades are the news of the day. On the earnings front, Deere & Co, First Solar, and Dropbox are the big movers of the day. Deere & Co reported better than expected top and bottom-line results that pleased investors. The news was accompanied by a favorable outlook for the U.S. farming market that has shares up 10.5% in premarket action. Shares of Dropbox are also moving higher, up 12.5%, after it reported better than expected results. The file-sharing company also raised guidance and initiated a share buyback program.

Shares of Chewy got a boost this morning when analysts at RBC upped their rating on the stock. According to them, Chewy has highly favorable risk-reward profile based on revenue and margin expansions. At the other end of the spectrum, shares of First Solar are moving lower following its weaker than expected report and unfavorable guidance. In other news, shares of Coca Cola are holding flat after the company warned Q1 EPS could be hurt as much as $0.02 per share due to the coronavirus outbreak.

Flash PMI And Existing Home Sales Due Out Late In The Morning

Flash PMI readings and Existing Home Sales data are due out later in the morning. The PMI, both manufacturing and services, are expected to hold steady if not advance from the last month. Readings on activity in NY and Philadelphia were both much hotter than expected earlier this week. On the housing front, existing home sales are expected to fall slightly from the previous month but remain above 5 million annualized units.

European Stocks Pressured by Coronavirus Fears; Euro Zone PMIs Show Better Growth

European shares slumped on Friday, as investors monitored the latest developments in the coronavirus outbreak. Traders generally followed the lead in Asia which was mostly lower across the board. Basic resources stocks lost the most, but all sectors on all major bourses are being pressured. The biggest concern for investors is the spreading of the coronavirus outside of China.

At 11:34 GMT, the U.K.’s FTSE 100 Index is trading 7416.93, down 19.71 or -0.27%. Germany’s DAX is at 13640.50, down 23.50 or -0.17% and France’s CAC is at 6043.11, down 19.19 or -0.32%.

Economic News

CNBC reported that leaders of the 27 EU member states failed to make any headway in budget talks on Thursday. The U.K.’s departure from the bloc last month is projected to leave a £55 billion ($71.3 billion) hole in the EU’s coffers over the next seven years.

Business activity in the Euro Zone accelerated more than expected this month, a business survey showed on Friday, in welcome news for policymakers at the European Central Bank who are battling to revive growth and chronically low inflation.

Euro Zone February Business Growth Better than Expected

IHS Markit’s Euro Zone Composite Flash Purchasing Manager’s Index (PMI), seen as a good gauge of economic health, rose to 51.6 in February from January’s final reading of 51.3, beating all forecasts in a Reuters poll which had a median prediction of 51.0. Anything above 50 indicates growth.

“The Euro Zone economy managed to pick up some momentum again in February despite many companies having been disrupted in various ways by the coronavirus, which caused supply problems,” said Chris Williamson, chief business economist at IHS Markit.

Demand remained relatively strong, suggesting there won’t be a deterioration next month. The new business index held at January’s seven-month high of 51.3.

Williamson said the survey was consistent with GDP growth of 0.2%, matching the projection in a Reuters poll published this week.

The headline index was buoyed by a rise in the PMI for the bloc’s dominant services industry to a forecast-beating 52.8 from 52.5.

With demand resilient, demonstrating some confidence, firms took on more workers, albeit at a slower rate than in January. The employment index dipped to 52.6 from 53.0.

While a manufacturing PMI held below the break-even mark, it continued its upwards march. It rose to 49.1 from 47.9, its highest level in a year and ahead of all forecasts in a Reuters poll.

An index measuring output, which feeds in to the composite PMI, rose to 48.4 from 48.0.

Most forward-looking indicators in the survey moved in the right direction, suggesting the manufacturing recovery was still on course and optimism remained elevated. The future output index only dipped to 57.9 from January’s 17-month high of 59.8.

“The expansion is being led by welcome resilience in the service sector but manufacturing is also showing encouraging signs of pulling out of the downturn that has plagued producers for over a year,” Williamson said.

Equities Fall, Risk of Correction Grow, Oil Prices In Reversal

The U.S. Futures Are Down In Early Trading

The U.S. index futures are pointing to a lower open in the Thursday session. The Dow Jones Industrial Average, S&P 500, and NASDAQ Composite are all down about -0.15%. Traders are cautious after the S&P 500 hit a new all-time due to the increased risk of a virus-related market correction. China reports the number of confirmed cases has topped 74,500 with 2118 dead on the mainland. South Korea reports that its cases are spiking despite containment efforts across the region.

A number of companies have issued revenue warnings because of the virus impact on global trade. Today’s news includes statements from air-carrier Air France and global shipping giant Maersk. Air France describes the impact as “brutal” while Maersk told its investors volumes and traffic will be significantly lower than expected.

Investment banker Goldman Sachs says the market is underestimating the fallout from the epidemic and I think they are right. At current levels, the S&P is trading nearly 19X forward earnings with consensus estimates in decline. At the current pace of decline, the 1st quarter earnings cycle will most likely result in negative EPS growth for the broad market.

Domino’s Surges On Results, Dividend And Guidance

In earnings news, shares of Domino’s Pizza are up nearly 20% after the delivery company reported earnings. EPS and revenue were well above the consensus estimates, the company issued a favorable outlook for the coming year and raised the dividend. Shares of Stamps.com are also on the move, gaining more than 35% after reporting solid revenue and earnings this morning.

At the other end of the spectrum, ViacomCBS and Aaron’s are both moving lower. ViacomCBS reported merger expenses were dragging on results and that sent shares down by -8.0%. Aaron’s, a rent-to-own furniture and electronics chain, reported mixed results and saw its shares move lower as well.

Economic Data Comes In Strong

The day’s economic data came in strong and suggests the market is wrong about FOMC policy. Initial claims came in at 210,000 and as expected. Initial claims are trending at historical lows and are consistent with healthy labor markets. Continuing claims and total claims also fell in this week’s data.

On the manufacturing front, the Philadelphia Federal Reserve’s MBOS came in much hotter than expected. The headline figure rose 20 points to 36.7 and a three-year high. Data within the report shows new orders, deliveries, backlogs, and employment all rose. The Empire State Manufacturing Survey is equally strong indicating a vigorous rebound in U.S. manufacturing this year.

 

Equities Rebound, Adidas Warns China Business Suffers, Housing Data Is Hot

The U.S. Futures Are Higher In Early Trading

The U.S. futures are moving higher in early Wednesday trading. The NASDAQ Composite advanced 0.50% to lead the market while the Dow Jones and S&P 500 both advanced 0.30%. The moves are driven by a round of better than expected earnings and dubious sign the spread of coronavirus in China is slowing. On the health front, Chinese officials report over 100 new deaths bringing the total to over 2,000. The number of new cases slowed from the previous day but still topped 1,000 infected.

The risk for markets remain despite the slow reopening of China’s industrial centers. In today’s news, shoe-maker Adidas reported its business in China was down more than 85%. Because China is a major manufacturing hub for the world’s shoe suppliers this could impact Adidas revenue in the coming quarters. Shares of the stock, listed on the OTC market board, are flat in the premarket.

Earnings Surprises Lift Market

A round of better than expected earnings is helping to lift sentiment in early trading. Shares of Garmin, Analog Devices, Genuine Parts Company, and Sonic Automotive are all moving higher following the release of their reports. Analog Devices is in the lead with an advance of 5.0%. The company reported a narrow miss on the top line but smashed consensus targets for EPS. Analog Devices also provided better than expected guidance adjusted for the impact of coronavirus.

Shares of technology-maker Garmin are up 4.5% in the premarket. It beat on the bottom line and raised full-year guidance. Sonic Automotive beat on the top and bottom line sending its shares up more than 3.5%. The only negative in this report is the company did not raise its dividend as expected. In other news, shares of Nvidia are also moving higher following Bernstein’s upward revision to its price target.

Economic Data Is Hot

Today’s economic data is hot. The headline Housing Starts number is negative but comes with many caveats for traders to consider. The first is that analysts had expected a decline of -11% so -3.6% is quite a beat. The second is that January’s figure was a blow-out so a little give-back isn’t bad. The third caveat for traders is that January’s figure was revised up to 17.7% leaving the YOY gains firmly in positive territory.

On the inflation front, PPI came in hot at the headline and core levels. Headling PPI rose 0.5% over the last month and is up 2.1% YOY. This is in-line with the FOMC’s view that current policy is appropriate. Traders looking for a dovish sound FOMC in today’s minutes may be disappointed. The FOMC minutes are due out this afternoon at 2 PM.

Apple Guides Lower, Coronavirus Still Spreading, U.S. Equities Fall

The U.S. Futures Are Lower In Early Trading

The U.S. futures are pointing to a lower open on Tuesday following a revenue warning from Apple. Apple says it is going to miss its previously stated guidance of $63 to $67 billion for the 1st quarter. The reason is the coronavirus. The world’s leading manufacturer of consumer electronics says production and sales are taking a hit in China. With production slowing sales will be impacted around the world. Shares of Apple are down about -2.5% in early trading after shedding more than -3.0% in the overnight session.

The Dow Jones Industrial Average is down about -0.55% while the S&P 500 a smaller -0.41%. The tech-heavy NASDAQ Composite with its exposure to China is leading with a loss of -0.60%. This week is a holiday-shortened week, today’s action is the first since the market closed last Friday. On the coronavirus front, China has announced another 1900 new cases and nearly 100 deaths. Among the dead are healthcare workers and the head of a major treatment center. In total, there are 72,350 cases worldwide and the number continues to grow. The full impact on the global economy will not be known for many months so traders should be cautious.

Earnings Season Still In Full Swing

With nearly 80% of the S&P 500 reports in the bag, the earnings season is winding down. Even so, there are still a number of market-moving releases left to come. Today’s news includes reports from Walmart, Advance Auto Parts, and Bloomin Brands. The results for all three are mixed.

Walmart reported a miss on the bottom line along with weaker than expected comps. The stock fell -1.0% on the news and then rebound to advance 1.0% before the open of the day’s session. The consumer giant raised its dividend and provided a stable outlook which was enough for the market. Advance Auto Parts also reported mixed results. The after-market auto parts store missed on the top line but delivered a solid bottom-line beat. Shares are up 2.0%, partially driven by a 300% increase to the dividend.

Economic Data Is Positive

The Empire State Manufacturing Survey came in hotter than expected. The headline reading of 12.9 is 8 points higher than the previous month. An uptick in new orders and shipments are the primary drivers although employment, backlogs, and delivery times all rose too. Later in the session traders will be watching for the homebuilder’s sentiment index due out at 10 AM. The most important read of the week will be tomorrow afternoon when the FOMC releases the minutes from the last meeting.

The Week Ahead – Economic Data, COVID-19 Updates and Geopolitics in Focus

On the Macro

It’s a busy week ahead on the economic calendar, with 64 stats to monitor in the week ending 21st February. In the previous week, just 46 stats had been in focus.

For the Dollar:

It’s a relatively busy week ahead on the economic calendar.

Through the 1st half of the week, NY Empire State Manufacturing figures will influence on Tuesday, ahead of a busy 2nd half.

We saw Chicago PMI figures recently have a material influence on the Dollar and risk sentiment. Expect the same from the NY State figures.

On Wednesday, while wholesale inflation numbers are the key driver, housing sector figures will need to continue to support upbeat sentiment towards the sector.

On Thursday, the focus will then shift to the all-important Philly FED manufacturing numbers, which are due out ahead of a busy Friday.

While existing home sales figures will garner some attention, the U.S Services PMI will have the greatest impact on Friday.

For the housing sector, mortgage rates saw 3-consecutive weekly declines before a slight uptick last week, which should drive demand…

Outside of the numbers, expect market sentiment towards monetary policy and risk appetite to also influence.

The Dollar Spot Index ended the week up by 0.45% to 99.124.

For the EUR:

It’s a relatively busy week ahead on the economic data front.

The markets will need to wait until Tuesday to digest business sentiment figures out of Germany and the Eurozone. The ZEW number will influence and we can expect businesses to factor in the coronavirus spread this time around.

Germany’s ZEW Economic Sentiment figure will have the greatest impact.

The focus will then shift to Germany’s GfK consumer climate figures due out on Thursday. Consumer spending continues to be a key area of focus for the ECB, so we can expect sensitivity to the numbers this week.

Wrapping up the week, we’ve got prelim February private sector PMI numbers out of France, Germany, and the Eurozone.

Upward momentum will need to continue towards a return to growth in the manufacturing sector to support the EUR.

The spread of the coronavirus in China and beyond, however, may give the EUR another blow.

Germany’s manufacturing PMI and the Eurozone’s composite will likely have the greatest influence.

Barring material deviation from prelim, finalized inflation figures out of France, Germany, Italy, and the Eurozone will likely have a muted impact in the week.

The EUR/USD ended the week up down by 1.05% to $1.0831.

For the Pound:

It’s a busy week ahead on the economic calendar.

Key stats include employment and wage growth figures due out on Tuesday and retail sales figures due out on Thursday.

We saw last month’s employment figures temper market expectations of a BoE rate cut, which leaves the Pound exposed to this month’s numbers.

Off the back of labor market numbers, January inflation figures are due out on Wednesday that will also influence sentiment towards monetary policy. Forecasts are for an uptick in inflationary pressure that should further ease expectations of a near-term rate cut. Much will depend on employment and retail sales figures, however.

The retail sales figures will likely be the key driver on the data front. A bounce back in spending would support the BoE’s initial outlook on economic growth following Brexit.

Of less influence in the week is CBI Industrial Trend Orders due out on Friday.

Outside of the numbers, expect chatter on trade negotiations to also influence. While there may be no progress with the EU, progress elsewhere is a must early on.

The GBP/USD ended the week up by 1.20% to $1.3047.

For the Loonie:

It’s a busy week ahead on the economic calendar.

December manufacturing sales figures due out on Tuesday will garner some attention ahead of an important 2nd half of the week.

Sales are forecast to fall by a further 0.2% in December, following a 0.6% slide in November. Positive numbers would be needed to deliver the Loonie with support.

In the 2nd half of the week, January inflation figures on Wednesday and December retail sales figures on Friday will be key.

A negative set of numbers and the BoC may well have a green light to ease policy further….

Outside of the numbers, the news wires and sentiment towards the global economy and oil consumption will also be key.

The Loonie ended the week up by 0.42% to C$1.3252 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

It’s another relatively quiet week ahead.

Key stats include 4th quarter wage growth figures due out on Wednesday and January employment numbers due out on Thursday.

Expect both sets of numbers to influence.

Wage growth has been tepid, which has raised concerns over the outlook for domestic consumption.

The RBA sees that the current low in interest rates and a pickup in wage growth would drive spending.

On Thursday, the employment numbers will also need to reflect a tightening in the slack to support a positive outlook on wage growth.

While the numbers will influence, expect news from China and any further moves by Beijing and the PBoC to deliver support.

The Aussie Dollar ended the week up by 0.61% to $0.6714.

For the Kiwi Dollar:

It’s another quiet week ahead on the economic data front. Key stats are limited to 4th quarter wholesale inflation numbers due out on Thursday.

We can expect updates from China and beyond on the impact of the coronavirus on productivity to be key, however.

The Kiwi Dollar ended the week up by 0.59% to $0.6438.

For the Japanese Yen:

It’s a busy week on the economic calendar. Key stats include 4th quarter GDP numbers due out on Monday alongside February industrial production figures,

The focus will then shift to January trade data due out on Wednesday.

GDP numbers are forecasted to be quite dire, which may force the BoJ to show what it has on offer.

Trade data will also garner plenty of attention as the markets look to assess the impact of COVID-19 on regional growth.

At the end of the week, January inflation figures will likely have a muted impact, barring a spike…

Outside of the numbers, economic data from the U.S could continue to give the Dollar the upper hand.

A jump in COVID-19 related deaths and an increase in fatalities outside of China would likely drive demand for the Yen, however.

News from China on the weekend was market risk positive…

The Japanese Yen ended the week down by 0.03% to ¥109.78 against the U.S Dollar.

Out of China

It’s a particularly quiet week on the economic data front. There are no material stats due out of China to provide direction to the global financial markets.

The lack of stats leaves the COVID-19 updates, and impact analysis in focus. We are expecting the government to continue to drive liquidity near-term…

News of new cases in decline should provide early support.

The Chinese Yuan rose by 0.22% to CNY6.9869 against the U.S Dollar in the week.

Geo-Politics

Trade Wars: While the global financial markets remained gripped by the COMVID-19 spread, there was some chatter on the news wires of an imminent trade war between the U.S and the EU.

The U.S President will certainly want to return the narrative to making American great again, going into the campaign trail.

Any threat of tariffs on EU autos and expect tensions to rise.

UK Politics: The European Parliament laid down the gauntlet last week, calling on the UK to retain EU policies in a range of areas in exchange for that ambitious trade deal…

The EU’s opening position is scheduled to be agreed on 25th February, when EU ministers meet. This will be the starting point for the EU and will give the markets some idea of what lies ahead.

Iran and the Middle East: It’s been relatively quiet in the Middle East. In the U.S, however, the Senate has been busy debating a resolution to shackle the U.S President’s ability to go to war with Iran. Interestingly, a number of Republicans have supported the bill that is expected to pass. While Trump is expected to veto the bill, it’s the first chink in the Republican armor.

Corporate Earnings

It’s another busy week ahead on the corporate earnings calendar. Marquee names releasing earnings include:

From the U.S: Walmart Inc. (Tue) and Kraft Heinz (Thurs).

Out of Germany: Deutsche Boerse AG (Mon) Deutsche Telekom AG (Wed), and Allianz SE (Fri) are big releases in the week ahead.

From the UK: HSBC Holdings PLC (Mon), Anglo American PLC (Thurs), BAE Systems (Thurs), Barclays PLC (Thurs), Lloyds Banking Group PLC (Thurs), and Pearson PLC (Fri) also scheduled to release earnings results.

The Weekly Wrap – Stats, Monetary Policy, and COVID-19 Drove the Major

The Stats

It was a relatively busy week on the economic calendar, in the week ending 14th February.

A total of 46 stats were monitored, following 60 stats from the week prior.

Of the 46 stats, 20 came in ahead forecasts, with 15 economic indicators coming up short of forecast. 11 was in line with forecasts in the week.

Looking at the numbers, 30 of the stats reflected an upward trend from previous figures. Of the remaining 16, 12 stats reflected a deterioration from previous.

For the Greenback, it was a bullish week, with economic data and sentiment towards monetary policy providing support. The Dollar Spot Index rose by 0.45% to 99.124 in the week.

Out of the U.S

It was a quiet start to the week for the Dollar.

The markets had to wait until inflation figures due out on Thursday for direction. With the annual rate of inflation holding steady at 2.3% and initial jobless claims sitting at 205k, the Dollar found support on Thursday.

On Friday, the stats were mixed, however, which limited the upside for the Dollar on the day.

While consumer sentiment jumped to a 15-year high in February, retail sales figures failed to impress. Retail sales rose by 0.3%, month-on-month in January, with core retail sales also rising by 0.3%. In December, core retail sales had risen by 0.6%, while retail sales had increased by just 0.2%.

If February’s consumer sentiment numbers are anything to go by, however, retail sales should get a boost in February.

On the production side, the numbers were also disappointing, with industrial production falling by 0.3% in January.

December JOLTs job openings on Tuesday had a muted impact on the Dollar.

On the monetary policy front, FED Chair Powell gave testimony to Congress over 2-days.

The Dollar came under fire on Tuesday as Powell raised concerns over the spread of COVID-19. While highlighting the risks, the FED Chair noted that monetary policy would stay pat should the economy remain resilient as anticipated.

In the equity markets, the Dow gained 1.02%, with the S&P500 and NASDAQ up by 1.58% and by 2.21% respectively.

Out of the UK

It was a busy start to the week on the economic calendar.

4th quarter GDP numbers together with December industrial and manufacturing production figures were in focus.

In the 4th quarter, the UK economy stalled, with the UK GDP up by 1.1% year-on-year, easing from a 3rd quarter 1.2%.

Industrial and manufacturing production both came up short of forecasts, whilst returning to growth following slides in November.

Trade data also saw a material shift, with both the UK’s trade balance and non-EU trade balance shifting from a deficit to a surplus.

While growth stalled and production figures disappointed it could have been worse, delivering some relief to the Pound.

Following better than anticipated private sector PMIs last week, hopes of the BoE standing pat near-term had provided the Pound with support before the slide to $1.28 levels.

Negative sentiment towards Johnson being able to garner a no-strings-attached trade agreement with the EU pressured the Pound.

Ahead of Tuesday’s numbers, talks of Britain and trade talks with Japan delivered early support in the week.

In the 2nd half of the week, the Pound got a 2nd boost, with the departure of the Chancellor of the Exchequer Javid raising the prospects of a loosening of the purse strings.

The Pound ended the week up by 1.20% to $1.3047.

The FTSE100 reversed gains from earlier in the week to end the week down by 0.77%. A stronger Pound contributed to the 100’s demise.

Out of the Eurozone

It was a quiet start to the week on the economic data front.

A lack of stats left the markets to focus on investor confidence figures from the Eurozone and Italian industrial production figures.

The Sentix Investor Confidence Index came fell from 7.6 to 5.2. Economists had forecast a fall to 4.1.

While concerns over the impact of the coronavirus had materially shifted sentiment towards the global economic outlook, European investors were rather calm at the time of the survey.

The Asia ex-Japan index slid by a more sizeable 11.3 points as the Asian region struggled to contain the spread.

With the numbers on the negative side and sentiment towards the Eurozone economy bearish, the EUR struggled early in the week.

Out of Italy, industrial production slumped by 2.7% month-on-month to leave production by 4.3% year-on-year. Economists had forecast a 0.5% decline in the month and a 0.2% decline year-on-year.

For key stats, the markets had to wait until Wednesday for industrial production figures from the Eurozone. Production slid by 2.1% in December, which was worse than a forecasted fall of 1.5%.

Things were not much better at the end of the week. GDP numbers out of Germany and the Eurozone added further pressure on the EUR.

Germany’s economy stalled in the 4th quarter, with growth year-on-year coming in at just 0.3%. Things would have been far worse for the EUR had the economy contracted…

For the week, the EUR fell by 1.05% to $1.0831.

For the European major indexes, it was a bullish week, with a softer EUR proving support. The DAX30 and EuroStoxx600 rose by 1.70% and by 1.49% respectively. The CAC40 saw a more modest 0.66% gain for the week.

Elsewhere

It was a relatively bullish week for the Aussie Dollar and the Kiwi Dollar.

The Aussie Dollar rose by 0.61% to end the week at $0.6714, with the Kiwi Dollar up by 0.59% to $0.6438.

For the Aussie Dollar

It was a relatively quiet week for the Aussie Dollar.

Economic data was limited to January business confidence figures on Tuesday and consumer confidence figures on Wednesday.

Business confidence figures on Tuesday provided support early in the week. While coming up short of forecasts, a rise from -2 to -1 in January eased jitters of a further pullback in business investment.

On Wednesday, consumer confidence figures impressed, with the Westpac Consumer Confidence Index rising by 2.3%.

While the numbers were Aussie Dollar positive, sentiment towards COVID-19 ultimately delivered the upside.

A bounce back to $0.67 levels on Tuesday came off the back of less alarming numbers out of China.

The upside was limited, however, with a spike in cases and deaths mid-week testing appetite for riskier assets.

For the Kiwi Dollar

It was a busier week on the economic calendar.

Key stats included electronic retail card sales and Business PMI numbers on Wednesday and Friday.

Retail sales fell by 0.1%, following a 0.8% decline in December, while the Business PMI rose from 49.3 to 49.6.

The numbers were certainly not good enough to deliver the upside in the week.

Monetary policy ultimately delivered strong support on Wednesday as the RBNZ stood pat on interest rates.

While holding rates steady, which was expected, the RBNZ delivered a more hawkish outlook on growth.

Talk of a pickup in economic growth in the 2nd half of the year eased any bets of further policy easing. The RBNZ also saw the effects of COVID-19 as a short term, 1st quarter issue…

For the Loonie

It was also quiet week, with economic data limited to housing sector data on Monday.

Housing starts and building permits delivered positive news but not enough to drive the Loonie into positive territory.

A shift in risk sentiment on Tuesday reversed losses from Monday, as crude oil prices bounced back from a Monday reversal.

Crude oil prices rallied in the week, in spite of both OPEC and the IEA cutting demand forecasts.

Expectations of OPEC and Russia cutting production to support prices delivered the upside in the week.

The bounce in crude oil prices and pick up in risk appetite provided the Loonie with much-needed support.

The Loonie ended the week up by 0.42% to C$1.3252 against the Greenback.

For the Japanese Yen

It was a particularly quiet week on the data front. There were no major stats in focus to provide the Yen with direction.

The lack of stats left the Yen in the hands of market risk appetite in the week.

We saw the pendulum swing both ways in the week, leaving the Yen relatively flat at the end of the week.

The Japanese Yen ended the week down by 0.03% to ¥109.78 against the U.S Dollar.

Out of China

January inflation figures were in focus through the 1st half of the week.

Inflationary pressures picked up at the start of the year. While inflationary pressures built, S&P and a number of banks downgraded growth forecasts for China in the 1st quarter.

There remains plenty of uncertainty over just how much impact the spread of the virus will have.

On Tuesday, China returned to work, however, which contributed to the pickup in risk appetite across the global markets on the day.

Through the 2nd half of the week, COVID-19 figures delivered dire news, weighing on risk appetite.

In spite of the shift in sentiment that saw the Yuan fall by 0.14% on Friday, the Yuen ended the week up by 0.22% to CNY6.9869.

The CSI300 rose by 2.25%, while the Hang Seng saw a more modest 1.50% gain.

Anticipated support from Beijing to mute the effects of COVID-19 delivered the upside in the week.

Equities Edge Higher, Strong Earnings Support Market, Coronavirus Spreads

The U.S. Equities Indices Are Higher In Early Trading

The U.S. equities futures are pointing to a slightly higher open on Friday. Trading sentiment is buoyed by a round of better than expected earnings from names like Nvidia, Newell Brands, and Canopy Growth Corp. Despite the earnings, the shadow of China’s coronavirus outbreak remains over the market. China reported 121 new deaths and nearly 5,100 new infections since yesterday’s report. The new deaths include numerous medical workers suggesting the virus is far more contagious than first understood.

The NASDAQ Composite is in the lead in the early premarket session. The tech-heavy index is up nearly 0.30% compared to a 0.18% advance for the S&P 500 and 0.18% increase for the Dow Jones Industrials. Traders should note, while the major indices are pushing to new all-time highs the Dow Jones Transportation Average has yet to break out. If Dow Theory holds true, the transports must confirm the new highs else the broader market is doomed to correction.

Earnings Are Better Than Expected

Nearly 80% of the S&P 500 have reported earnings so far this cycle and the results are better than expected. The broad market is looking at EPS growth in the range of 1.0%, far better than the -2.0% predicted just before the cycle started. Today’s news includes reports from consumer products company Newell Brands among others.

Newell Brands reported better than expected top and bottom-line results. The bad news is net revenue fell on a YOY basis and the guidance for 2020 is weak. Shares are flat in early trading. Nvidia, on the other hand, beat expectations and gave positive outlook sending shares up more than 6.0%. Strength was driven by data center demand that is in turn driven by the growing cloud-computing industry.

Canopy Growth Corp reported better than expected earnings and sent its shares up more than 20%. The Canadian cannabis giant says revenue grew nearly 50% on a YOY basis and smashed the consensus estimate.

Economic Data Good But Not Great

Today’s economic calendar includes Retail Sales and Import/Export Prices. On the inflation front, import and export prices came in better than expected. The import price came in unchanged versus an expected drop while export prices rose 0.7%. The data shows global demand is accelerating and that bodes well for 2020 GDP. In retail news, Retail Sales rose 0.3% as expected and up 0.4% at the core level. Core retail sales are a tenth better than expected. While good, the data offset by revisions to the previous month’s data.

Equity Futures Plunge, Coronavirus Spread Accelerates, Earnings Still In Focus

The Futures Are Down In Early Trading

The U.S index futures are down in early trading following news out of China. China revealed the number of new cases of coronavirus surged by 15,000 overnight, primarily due to a new clinical test. The number of deaths also surged, up 254 since yesterday, raising the stakes in terms of potential for global economic impact.

With China’s manufacturing hub of Hubei province shut down, it is certain the world’s supply chain will feel the effects of this outbreak for months to come. The tech-heavy NASDAQ Composite, with its heavy exposure to China and Asia, is in the lead with a loss of -0.95% while the Dow Jones and S&P 500 are both down about -0.80%.

Earnings Are Still In Focus

In stock news, a raft of corporate earnings came out this morning including reports from Cisco, Pepsi, AIG and Applied Materials. Cisco is the headline of the day. The company reports another decline in revenue and a shortfall compared to estimates that have the stock down more than -5.0% in early trading. Shares of Pepsi are edging higher in the early morning session. The global supplier of beverages and snacks beat revenue estimates on better than expected organic sales growth.

Shares of AIG are among the days winners. The stock reported a return to underwriting profit growth and sent the stock up more than 2.0%. Shares of consumer staple Kraft are edging lower in the early session after reporting mixed earnings. The company fell short on revenue due to a decline in organic sales but beat on the bottom line. Shares are down about -0.40% on the news. In other stock news, shares of Tesla are moving lower by 4.0% after hitting all-time highs in the last week. The company revealed plans for a $2 billion stock offering that is going to greatly dilute shareholder value.

The Economy Is Still In Good Shape

Today’s economic data confirms the message sent to Congress by Fed Chief Jerome Powell; the economy is still in good shape. On the labor front, the jobless claims figures fell by -2,000 to 205,000 and remain near historic-low, consistent with healthy and tight labor conditions. On the inflation front, CPI came in at 0.1% and a tenth shy of expectations. At the core level CPI rose 0.2% and as expected while the YOY comparisons came in at 2.5% and 2.3%.

Equity Markets Rise, Economy In Good Place, Viral Impact Remains An Unknown

The Futures Are Pointing To A Higher Open

The U.S. index futures are pointing to a higher open on Wednesday following new all-time highs set in the previous session. The move is largely earnings-driven despite the unknown impact of China’s coronavirus. China reported 97 more deaths in the overnight session, the total number of cases now tops 44,000. The pace of spread appears to be slowing but the virus is not fully contained. Singapore reported this morning another case and line of infection has been found there. The NASDAQ Composite is leading the charge with a gain of 0.55% while the Dow and S&P 500 trail with gains near 0.45%.

Shares of gaming and airline stocks are leading today’s action. Wynn Resorts and Las Vegas Sands are both up more than 2.0% due to their heavy exposure to China. Airlines are up a more tepid 0.5% to 1.0%. In earnings news, shares of Lyft fell -5.2% after reporting strong earnings and weak guidance. The company sees growth slowing in 2020, not something the market likes to hear. Shares of CVS, Coors, and Teva are all moving higher in the premarket after reporting better than expected earnings.

Earnings Season Still In Focus

CVS lags the group with an advance of 2.5%, the integrated healthcare company beat on the top and bottom line and posted a high single-digit increase in prescription volume. Teva Pharmaceuticals saw its shares rise by about 3.4% in the premarket session due to signs its turnaround plans are working. EPS is up more than 100% on a YOY basis with a positive outlook for 2020 growth.

Molson-Coors leads today’s earnings news with its gain of 3.6%. The beermaker has made a push to premiumization that is driving top and bottom-line results. so far, about 70% of the S&P 500 has reported for the 4th quarter with more than 70% of them beating consensus. The caveat for traders is that the pace of outperformance is below the historical averages and the outlook for future growth continues to see downward revisions.

The Economy Is In A Good Place

Jerome Powell dominates the economic calendar this week with his testimony to Congress. According to the Fed Chief, the U.S. economy is in a good place. The committee is watching the coronavirus outbreak for potential spillover into the U.S. economy but does not rate it a major risk. The committee also expects current monetary policy to be appropriate for the foreseeable future.

There is no data due out today but some important releases will come out on Thursday and Friday. Tomorrow, the all-important CPI is expected to hold steady at 0.2%. On Friday, traders will be watching for signs of consumer health in the Retail Sales figures.