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.

US Stock Market Overview – Stocks Drop and the VIX Surges as the Fed Stands Ready

US stocks continue to tumble on Friday, with the major averages down more than 3% at the lows of the session. Some of the larger tech stocks like Microsoft and Apple slammed lower but rebounded to close well off their lows. Gold prices tumbled on Friday, pulling down the metal mining stocks. The Fed was on the tape mid-day saying that they stand ready to lower rates if need be. The market is currently pricing in 3-rate cuts in 2020 with one coming in March of 2020.

All sectors in the S&P 500 index were lower on Friday, led down by Utilities, Energy was the best performing sector in a down tape. Inflation came out in line with expectations, but this did not affect the 10-year treasury yields which dropped to another all-time low. There is little word from the White House about how they will coordinate a response to the coronavirus which is also keeping inventors skittish. The VIX volatility index hit multi-year highs climbing up to 50%, the highest level since 2008.

Inflation Rises

The Personal-consumption expenditures rose 0.2% in January from December, according to the Commerce Department. Personal income advanced 0.6% last month, the largest gain in 11 months. Expectations were for a  0.2% increase in spending and a 0.4% gain in personal income. Gains in income and spending came against the backdrop of still-modest inflation pressures. The price index for personal consumption expenditures, rose 0.1% on the month and was up 1.7% from a year earlier. Year-over-year price gains were 1.5% in December and 1.3% in November.

Mortgages Continue to Buoy Housing Sales

The spread of the coronavirus and the fears associate with it sent bond yields tumbling, the average rate on the popular 30-year fixed mortgage fell to 3.23%, an 8-year low. The lower yields are buoying housing sales. The 30-year fixed loosely follows the yield on the 10-year Treasury, which is now at a record low.

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.

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.

Asian Shares Mostly Lower; Bank of Korea Leaves Policy Rate Unchanged While Aussie Yields Hit Record Lows

The major Asia Pacific stock indexes traded mostly lower on Thursday as cautious investors digested the latest news over the fast-spreading new coronavirus while assessing the potential global economic impact of the virus that has so far infected more than 81,000 people and killed over 2,700.

Although most of the people infected and killed by the disease to-date are from China, the number of cases outside of the country has surged in recent weeks with countries like South Korea, Italy and Iran at the forefront.

Meanwhile, the U.S. Centers for Disease Control and Prevention on Wednesday confirmed the first potential “community spread” of the coronavirus stateside. Additionally, late Wednesday, President Donald Trump announced that Vice President Mike Pence will be in charge of the U.S. response to the deadly outbreak. Trump also said the risk of the disease to the country remained “very low.”

On Thursday, Japan’s Nikkei 225 Index settled at 21948.23, down 477.96 or -2.13%. South Korea’s KOSPI Index finished at 2054.89, down 21.88 or -1.05% and Hong Kong’s Hang Seng Index closed at 26687.89, down 8.6 or -0.03%.

China’s Shanghai Index settled at 2991.33, up 3.4 or +0.11% and Australia’s S&P/ASX 200 Index closed at 6657.90, down 50.2 or -0.75%.

Early in the session, U.S. futures markets are pointing toward a lower opening on Thursday after the benchmark S&P 500 Index wiped out $1.7 trillion in just two sessions.

Bank of Korea Keeps Policy Rate Unchanged

In an unexpected move, the Bank of Korea kept its benchmark policy rate unchanged. Central bank policymakers surprised the financial markets by holding the benchmark interest rate at 1.25% when analysts polled by Reuters were expecting a rate cut. That was despite a recent spike in the number of coronavirus cases in the country threatening its economy.

Aberdeen Standard Investments’ Leong Lin Jing described the Bank of Korea’s interest rate decision as “a little bit curious.”

“Bank of Korea has had a habit of being a little bit behind the curve … when acknowledging that growth is slowing down,” Leong said.

Australian Shares Fall for Fifth Straight Session

Increased reports of coronavirus cases around the world saw Australian shares tumble of a fifth consecutive session on Thursday, wiping out all the gains achieved earlier in the year, the Brisbane Times reported.

All sectors aside from healthcare and utilities finished in the red, led by steep declines in technology and energy shares. As was the case earlier this week, the weakness was driven by uncertainty on the human and economic toll the coronavirus may bring.

In other news, Australia’s 10-year bond yield fell to a new record low of 0.845 percent after Australia’s Prime Minister Scott Morrison said risk of global pandemic is very much upon us, while urging the need to take action.

Additionally, Australia private capital expenditure dropped -2.8% in Q4, much worse than expectation of 0.5% increase. In seasonally adjusted terms, building and structures dropped -5.9%. Mining dropped -2.7%. Equipment, plant and machinery rose 0.8%. Manufacturing dropped -10.1% and other selected industries fell -1.9%.

Trump: US Coronavirus Risk ‘Very Low’; Microsoft Warns of Windows Unit Revenue Miss

U.S. equity markets finished mixed on Wednesday with the S&P 500 Index falling for a fifth straight session, while the selling pressure was a little lighter than the two previous sessions, the price action remained volatile as investors continued to react to headlines about coronavirus and its potential impact on the U.S. economy.

In the cash market on Wednesday, the benchmark S&P 500 Index settled at 3116.39, down 11.82 or -0.36%, the blue chip Dow Jones Industrial Average finished at 26957.59, down 123.77 or -0.43% and the technology-based NASDAQ Composite closed at 8980.78, up 15.17 or +0.17%.

Trump Says Coronavirus Risk in US is Low

President Donald Trump told Americans on Wednesday that the risk from coronavirus remained “very low,” and placed Vice President Mike Pence in charge of the U.S. response to the looming global health crisis.

He also said the spread of the virus in the United States was not “inevitable” and then went on to say: “It probably will, it possibly will. It could be at a very small level, or it could be at a larger level. Whatever happens we’re totally prepared.”

U.S. Coronavirus Update

Dozens of people were being checked for the coronavirus in the New York City area on Wednesday, officials said, but Governor Andrew Cuomo said the state has had no confirmed cases so far, Reuters reported.

“This situation is not a situation that should cause undue fear,” Cuomo told a news conference, saying that 27 people in New York have tested negative for the virus.

I’m happy to say right now, we don’t have a case,” county health commissioner Lawrence Eisenstein said.

In other news, the Centers for Disease Control and Prevention confirmed an infection of the new coronavirus in California in someone who had not traveled outside the United States or been exposed to a person known to have the virus, a first for the country.

Microsoft Expects Windows Unit to Miss Revenue Outlook on Coronavirus Impact

Microsoft Inc. said on Wednesday it does not expect to meet its quarterly revenue forecast for its Windows and personal computing business as a result of the coronavirus outbreak, sending its shares down more than 1% in after-market trading.

“Although we see strong Windows demand in line with our expectations, the supply chain is returning to normal operations at a slower pace than anticipated,” the company said in a statement.

Microsoft is the second company in the trillion dollar club to withdraw outlook. Earlier this month, Apple said that it may not be able to meet its March-quarter sales forecast.

US Stock Market Overview – Stocks Close Mixed; Nasdaq Outperforms; The Russell Drops Sharply

US stocks were mixed on Wednesday after initially rising, but the Dow and S&P moved into the red and remain underwater for the latter half of the trading session. The Nasdaq broke a 4-day losing streak driven by the FANG stocks which outperform. The Russell 200 was the worst-performing average declining by 1.2%. Oil prices were under significant pressure falling 3%, as concerns over the coronavirus continued to weigh on energy. All sectors in the S&P 500 index were lower driven down by Energy, Healthcare was the worst-performing sector. US home sales surged higher rising nearly 8%, driven by rising mortgage applications. The VIX volatility index slipped slightly but still remain buoyed above 27%.

US Home Sales Rise

The commerce department reported that US single-family homes raced to a 12-year high in January. New home sales jumped 7.9% to an annual rate of 764,000 units last month, the highest level since July 2007. December’s sales pace was revised up to 708,000 units from the previously reported 694,000 units. Expectations had been for new home sales, which account for about 12.3% of housing market sales, which would advance 3.5% to a pace of 710,000 units in January. New home sales jumped 30.3% in the Midwest to their highest level since October 2007.

The gain in home sales was driven by rising mortgage application volume which rose 1.5% last week from the previous week, according to the Mortgage Bankers Association. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances decreased to 3.73% from 3.77%, with points decreasing to 0.27 from 0.28. Applications to refinance a home loan fell 1% for the week but were still 152% higher than a year ago.

Energy Inventories Rose

US crude oil inventories increased by 500 thousand barrels from the previous week. At 443.3 million barrels, crude oil inventories are about 3% below the five year average for this time of year. Gasoline inventories decreased by 2.7 million barrels last week and are about 2% above the five year average for this time of year. Distillate fuel inventories decreased by 2.1 million barrels last week and are about 5% below the five year average for this time of year.

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.

 

E-mini NASDAQ-100 Index (NQ) Futures Technical Analysis – Best Value Zone Target is 8628.50 to 8360.75

March E-mini NASDAQ-100 Index futures are trading slightly lower on Wednesday after hitting it lowest level since January 8 earlier in the session. The move actually erased all of this year’s gains. However, the index has clawed back most of those earlier losses and is now in a positon to possibly turn higher for the session.

At 11:16 GMT, March E-mini NASDAQ-100 Index futures are trading 8850.50, down 3.75 or -0.04%.

Fundamentally, the selling pressure is being fueled by concerns that the rapidly spreading coronavirus will spread throughout the world, leading to an eventual global recession.

Daily March E-mini NASDAQ-100 Index

Daily Technical Analysis

The main trend is down according to the daily swing chart. It turned down on Tuesday when sellers took out a pair of swing bottoms at 8966.00 and 8925.50. These were the last two main bottoms before the all-time high. The next two main bottom targets come in at 8678.00 and 8189.25.

The main range is 7494.00 to 9763.00. Its retracement zone at 8628.50 to 8360.75 is my primary downside target. This could also be a value zone so look for buyers to return on the first test of this area.

Daily Technical Forecast

The steep, four-day decline sets up a possible closing price reversal bottom. However, I would like the chart pattern better if it formed after testing 8628.50 to 8360.75.

Based on the early price action, the direction of the March E-mini NASDAQ-100 Index the rest of the session on Wednesday is likely to be determined by trader reaction to Tuesday’s close at 8854.25.

Bearish Scenario

A sustained move under 8854.25 will indicate the presence of sellers. Taking out the intraday low at 8709.50 will indicate the selling is getting stronger. This could lead to an eventual test of the main 50% level at 8628.50.

Buyers could step in on the first test of 8628.50, but if it fails then look for the selling to possibly extend into the Fibonacci level at 8360.75. This is followed closely by an uptrending Gann angle at 8286.00.

Bullish Scenario

A sustained move over 8854.25 will signal the presence of buyers. If this move is able to generate enough upside momentum then look for the rally to possibly extend into an uptrending Gann angle at 9078.00 and a steep downtrending Gann angle at 9251.00. Since the main trend is down, watch for sellers on a rebound into 9078.00 to 9251.00.

Asian Shares Plunge as Investors Seek Safe-Haven Protection Amid Coronavirus Fears

The major Asia Pacific stock indexes plunged on Wednesday in reaction to a U.S. warning to Americans to prepare for the possibility of a coronavirus pandemic. The same warning jolted Wall Street on Tuesday, pushing safe-haven U.S. Treasurys to record lows. The benchmark S&P 500 Index and blue chip Dow Jones Industrial Average both shed more than 3% yesterday in their fourth straight session of losses.

On Wednesday, Japan’s Nikkei 225 Index settled at 22426.19, down 179.22 or -0.79%. Hong Kong’s Hang Seng Index closed at 26683.71, down 209.10 or -0.78% and South Korea’s KOSPI Index finished at 2076.77, down 26.84 or -1.28%.

China’s Shanghai Index settled at 2076.77, down 26.84 or -1.28% and Australia’s S&P/ASX 200 closed at 6708.10, down 158.50 or -2.31%.

Corona Virus Update:  U.S. Health Official Warns of Global Pandemic

Investors continued to monitor the internet for updates on the coronavirus outbreak that is spreading outside of China, with a top U.S. health official warning Tuesday it will likely become a global pandemic. The health official also added that it’s just a matter of time before the outbreak starts to spread to the U.S.

“Current global circumstances suggest it’s likely this virus will cause a pandemic,” Anne Schuchat, principal deputy director of the Centers for Disease Control and Prevention, told reporters at a news briefing.

“It’s not so much a question of it this will happen any more, but rather more a question of when this will happen and how many people in this country will become infected and how many of those will develop severe or more complicated disease,” she added.

Centers for Disease Control and Prevention (CDC) official Dr. Nancy Messonnier also told reporters on a conference call that the American public should prepare in the expectation that the coronavirus situation in the U.S. “could be bad.”

Hong Kong Plans on Spending $15 Billion to Support Economy amid Coronavirus Crisis

The Hong Kong government has announced 120 billion Hong Kong dollars ($15.4 billion) worth of measures to support its economy, which has been dragged down by pro-democracy protests and the new coronavirus outbreak.

The Hong Kong economy entered its first recession in a decade when it posted a 2.8% year-on-year decline in third-quarter gross domestic product. In the fourth quarter, the city’s GDP fell by 2.9%. For the whole of 2019, Hong Kong’s economy contracted by 1.2% – the first annual GDP decline since 2009, said Hong Kong’s Financial Secretary Paul Chan in his budget speech on Wednesday.

Australian Shares Plunge on Coronavirus Fears, Declining Construction Work

In Australia, the benchmark S&P/ASX 200 Index fell after coronavirus fears drove down bond yields, taking the Big Four banks with them. Australia and New Zealand Banking Group dropped 1.96%, Commonwealth Bank of Australia shed 1.67%, Westpac declined 1.67% and National Australia Bank slipped 2.09%.

Stocks also weakened after the Australian Bureau of Statistics said the value of construction work done in the December quarter of 2019 declined. The seasonally adjusted estimate of the value of work done in total construction dropped 3% in the December quarter as compared to the previous period.

US Stock Market Overview – Stocks Tumble and the VIX Surges on Coronavirus Fears

US stocks tumbled for a second consecutive trading session, with the Dow Industrials falling more than 3%. Stocks started the session in the black, but prices quickly turned lower as concerns over the spread of the coronavirus weighed on a riskier asset. The 10-year Treasury yield continued to tumble lower falling to a 100-year low. The interest rate curve as the short end of the treasury curve is now inverted pointing to a potential recession. All sectors in the S&P 500 index were lower, led down by Energy which dropped nearly 5% and materials which were down 4.5%. Consumer confidence rose less than expected, while housing prices continued to rise. The decline in treasury yields will pull down mortgage rates, potentially setting up a surge in home sales. Bob Iger will step down as Disney CEO and assume the role of executive chairman.

The VIX Continues to Surge

The VIX volatility index surged another 11% on Tuesday as riskier assets tumbled. The VIX hit a 12-month high hitting 30%.

Consumer Confidence Rise Less than Expected

US Consumer confidence rose less than expected in February according to The Conference Board. The consumer confidence index came in at 130.7, up from 130.4 in January. Expectations has been for confidence to rise to 132.6. The Conference Board’s present situation index, which accounts for consumers’ assessment of the current business and labor environment, dropped to 165.1 from 173.9 in January.

Home Prices Rise

Home prices rose 3.8% annually according to the S&P CoreLogic Case-Shiller National Home Price Index. That is up from the 3.5% gain in November. The 10-city composite increased 2.4% annually, up from 2% in the previous month. The 20-city composite rose 2.9%, up from 2.5% in the previous month.

Twelve of the 20 cities saw bigger price increases in the year ending December compared with November’s annual read. Every city in the 20-city composite saw a gain in home values. Chicago and New York saw the smallest annual gains at just 1% for each.

Disney Will Get a New CEO

Bob Iger announced that he will step down as Disney CEO and assume the role of executive chairman. Bob Chapek, who most recently served as chairman of Disney parks, experiences and products, will assume the role of CEO, effective immediately, Disney announced.

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.

US Stock Market Overview – Stocks Tumble on Coronavirus Fears, the VIX sSrges along with Gold Prices

US stocks tumbled on Friday with all three major indices dropping sharply. The decline in the Dow Industrial average was the second-largest drop in history. Concerns over the spread of the coronavirus and a decline in global growth weighed on riskier assets. The rapid spread of the virus through South Korea and Italy led to the market selloff. The selloff in the S&P 500 index put stocks in the red for 2020. All sectors in the S&P 500 index were lower on Monday, led down by Energy Shares and Cyclicals. Utilities that are defensive in nature were the best performing sector in the S&P 500 index.

The US 10-year treasury yield dropped below support levels falling to 1.46%, the lowest in more than 100-years. This put downward pressure on the mortgage market which could help boost home sales. Gold prices surged helping to buoy metals and gold miners. Crude oil prices tumbled more than 3% weighing on energy shares. Apple shares tumbled more than 4% helping to drag down the major indices. Bernie Sanders strong showing in the Democratic primary over the weekend put additional downward pressure on the healthcare sector. Bernie Sanders has made it clear that if he is elected President he will put healthcare companies out of business.

The VIX Surges but Settles Off its Highs

The VIX volatility index surged higher, closing up nearly 37% on Monday, but closed off the highs of the day. The VIX measures the “at the money strike price” implied volatility on the S&P 500 index. The VIX hit a high of 26% on Monday which was the highs level in more than 14-months but closed off its highs near 23%.

Buffet Sees a Slowdown

The oracle of Omaha was interviewed during the North American morning by CNBC. Warren Buffett said that while the U.S. economy still looks healthy, it isn’t as robust as it was 6-months ago thanks to headwinds like the Trump administration’s trade war and coronavirus. Buffet said that business is down but it’s down from a very good level.

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.

IMF, US Government, Fed are Watching the Data, When They Should Be Listening to the Financial Markets

Are officials playing “kick the can” with the financial impact of the coronavirus on the global economy, or are we ready to say we’re going to see zero growth during the first quarter? And how long are we going to have to wait for predictions of a global recession? Two quarters?

I get that no one wants to cause a panic in the markets, but guess what, I think there will be, once the seemingly optimistic Federal Reserve policymakers finally have some negative data they can work with. By then it may be a little too late to rescue the second quarter.

After sounding too optimistic about the economy in 2018 and aggressively raising rates three times in 2019, they now appear to be a little stubborn about acknowledging there is a future economic downturn in the air.

Sometimes I feel that Fed members are more worried about predicting the length of an economic downturn than the actual start of economic problems. But now is the time to set aside track record worries like they were batting averages and make the call, even it is a tad early.

In this case, calling it a disaster early will be better than calling it too late. I don’t think anyone is going to be upset if the Fed makes a pre-emptive strike and makes an insurance rate cut a few months early. After all, investors are already pricing in at least one rate cut later in the year.

IMF:  We Don’t Know When It Will Happen, but We’ll Tell You What It Will Look Like

On February 19, International Monetary Fund (IMF) chief Kristalina Georgieva said the new coronavirus, or COVID-19, outbreak is the “most pressing uncertainty” facing, the world economy right now.

She further added it’s an international health emergency that “we did not anticipate in January” and “It is a stark reminder of how a fragile recovery could be threatened by unforeseen events.”

But then she went into optimistic mode and said, “If the disruptions from the virus end quickly, we expect the Chinese economy to bounce back soon, she wrote. “Spillovers to other countries would remain relatively minor and short-lived, most through temporary supply chain disruptions, tourism, and travel restrictions.”

February 19? This sounds like something she should have said in late January. Last week, Apple warned investors about reduced demand and supply chain interruptions. So I think the IMF is behind the ball.

To her credit, Georgieva did mention the IMF’s longer-term viewpoint, saying that a long-lasting outbreak would have significant consequences for the Chinese and global economies.

“Its global impact would be amplified through more substantial supply chain disruptions and a more persistent drop in investor confidence, especially if the epidemic spreads beyond China,” she said in a post.

Over the weekend, Georgieva started to acknowledge a worst case scenario, “But we are also looking at more dire scenarios where the spread of the virus continues for longer and more globally, and the growth consequences are more protracted.”

Economic Impact of Coronavirus Will Be Clearer in ‘Three or Four Weeks,’ Mnuchin Says

Meanwhile, U.S. officials will have a better idea of how the coronavirus outbreak will impact the economy in “three or four weeks,” U.S. Treasury Secretary Steven Mnuchin said Sunday.

“I think we’re going to need another three or four weeks to see how the virus reacts, until we really have good statistical data,” he said.

Mnuchin further added, “Although the rate of the virus spreads at is quite significant, the mortality rate is quite small. It’s something we’re monitoring carefully, one of the discussions we’re having here is that countries should be prepared, but I think we’re at a point where it’s too early to either say this is very concerning or it’s not concerning.”

Will check back with you, Mr. Mnuchin, in three or four weeks, to see what the markets seem to already know.

Fed Still Waiting on the Numbers

Last week, Federal Reserve Vice Chairman Richard Clarida reiterated that the “fundamentals in the U.S. are strong” though he said Fed officials are monitoring risks, in particular the coronavirus.

“It’s obviously something that is probably going to have a noticeable impact on Chinese growth in the first quarter,” he said. However, there’s no indication at this point that it will impact policy.

“What we would be looking for is some body of evidence that suggests that we need to make a material reassessment of our outlook, and certainly we have not done that yet,” Clarida said. “But we are monitoring, because China is a huge part of our economy.”

Conclusion

The IMF is not predicting an economic downturn per se, but seems to be telling us what one would look like in both the short-term and long-term. Mnuchin says we won’t know if there are going to be problems for three or four weeks and the Fed’s Richard Clarida says the economy is fine and the Fed is monitoring the situation.

In the meantime, the financial markets, especially U.S. Treasurys, gold, the Japanese Yen and to some extent, the global equity markets, seem to be saying the economic problems are already here.

Financial market investors were ahead of the Fed before in 2018 and central bankers made three cuts in 2019. I think they are right again so I expect the Fed to cut its benchmark rate sooner rather than later in 2020.

E-mini NASDAQ-100 Index (NQ) Futures Technical Analysis – Next Downside Target Zone 9344.25 to 9245.50

March E-mini NASDAQ-100 Index futures settled sharply lower on Friday as a spike in new coronavirus cases in China and elsewhere sent investors scrambling for safer assets such as gold and government bonds. The cash market NASDAQ Composite recorded its worst session since January 27, while posting its first loss in three weeks.

On Friday, March E-mini NASDAQ-100 Index futures closed at 9458.00, down 166.25 or -1.76%.

Microsoft fell more than 3% to lead the Dow lower on Friday. Facebook, Amazon, Netflix, Google-parent Alphabet and Apple all closed at least 1.5% lower to drag the technology sector in the other major indexes and the NASDAQ lower.

Daily March E-mini NASDAQ-100 Index

Daily Technical Analysis

The main trend is up according to the daily swing chart. However, momentum shifted to the downside with the formation of the closing price reversal top on Thursday and its subsequent confirmation on Friday.

A trade through 9763.00 will negate the closing price reversal top and signal a resumption of the uptrend. The main trend will change to down on a trade through a pair of main bottoms at 8966.00 and 8925.50.

The minor trend is down. This move confirms the shift in momentum to down.

The main range is 8925.50 to 9763.00. Its retracement zone at 9344.25 to 9245.50 is the next downside target. Since the main trend is up, buyers could step in on a test of this area.

Short-Term Outlook

The closing price reversal top and its subsequent confirmation led to a shift in momentum to the downside. This chart pattern does not change the main trend to down. It usually leads to a 2 to 3 day counter-trend move of about 50% to 61.8%, which means were likely to see a further break into the retracement zone at 9344.25 to 9245.50.

The first leg down from any major top is usually triggered by long liquidation. This is usually followed by a rally equal to 50% to 61.8% of the first leg down. Trader reaction to this retracement zone will tell us if the index is headed lower or higher.

If it’s headed higher then buyers will take out the high end of the retracement zone. If it is headed lower then aggressive counter-trend sellers will come in to stop the rally. Their job is to create a secondary lower top.

In the professional world, traders short when they have a previous top to lean on. They don’t try to pick tops to short. Maybe to exit long positions, but not to short. So before we can call this chart pattern a major top, we’re going to need to see the formation of a secondary lower top.

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.

US Stock Market Overview – Stocks Slide on Coronavirus Fears

US stocks traded under pressure on Friday as the dollar finally reversed which could provide a respite for large-cap multinational companies. The strength of the greenback is putting downward pressure on EM and Asian shares, which eventually could spill over on US stocks. The S&P 500 index could be vulnerable to profit-taking. Multinational corporations will suffer earnings losses as the dollar moves higher which means that the earnings forecasts in the US might be overstating the value of US stocks.

Multinational corporations that have earnings in other currencies, will only be able to capitalize on the value of the earnings if they are hedged. If not, when they convert the foreign currency back to US dollars, they will get less than they would last quarter. Gold prices surged higher buoying mining companies.

Sectors in the S&P 500 index were mixed, with technology leading the broader markets lower.  Real-estate bucked the trend.

Existing Home Sales Fall in January

US existing home sales fell in January. The National Association of Realtors said on Friday existing home sales declined 1.3% to an annual rate of 5.46 million units last month. December’s sales pace was revised down to 5.53 million units from the previously reported 5.54 million units. Expectations were for existing home sales falling 1.8% to a rate of 5.43 million units in January. Existing home sales, which make up about 90% of U.S. home sales, surged 9.6% on a year-on-year basis in January.

Jobless Claims Bounce as Expected

Initial claims increased 4,000 to 210,000 for the week ended February 15, according to the Labor Department. The expectation had forecast claims to increase to 210,000 in the latest week. The four-week moving average of initial claims, fell 3,250 to 209,000 last week.

Regional Manufacturing Rises More than Expected

The Philadelphia Fed gauge of business activity surged in February to its highest level in three years. The regional Fed bank’s index jumped to 36.7 in February from 17 in the prior month. Expectations had been for the index to come in lower at a 10 reading.

E-mini NASDAQ-100 Index (NQ) Futures Technical Analysis – Strengthens Over 9637.25, Weakens Under 9546.75

March E-mini NASDAQ-100 index futures are trading lower on Thursday after plunging from a record high hit earlier in the session. Shortly before the mid-session, a wave of selling hit the U.S. stock market, hitting protective sell stops and driving the index sharply lower. Conditions have calmed since then and the market has clawed back some of those losses, but traders are bracing for heavy volatility into the close.

At 18:24 GMT, March E-mini NASDAQ-100 Index futures are trading 9602.25, down 131.25 or 1.35%. The high of the session is 9763.00.

Daily March E-mini NASDAQ-100 Index

Daily Technical Analysis

The main trend is up according to the daily swing chart, but the price action suggests the index may be forming a potentially bearish closing price reversal top. The index is also trading lower for the week.

A trade through 9763.00 will signal a resumption of the uptrend. The main trend will change to down on a trade through 8966.00.

The minor trend is also up. A trade through 9511.25 will change the minor trend to down. This will shift momentum to the downside.

The first minor range is 9511.25 to 9763.00. Its 50% level or pivot is 9637.25.

The second minor range is 9330.75 to 9763.00. Its 50% level or pivot is 9547.00.

The market has been straddling these 50% levels all session.

The short-term range is 8966.00 to 9763.00. Its retracement zone at 9364.50 to 9270.50 is the first key downside target zone.

Daily Technical Forecast

Based on the early price action and the current price at 9602.25, the direction of the March E-mini NASDAQ-100 Index into the close is likely to be determined by trader reaction to the pair of 50% levels at 9637.25 and 9546.75.

Bullish Scenario

A sustained move over 9637.25 will indicate the presence of buyers. This will put the index in a position to challenge the record high at 9763.00.

Bearish Scenario

A sustained move under 9546.75 will signal the presence of sellers. If this move created enough downside momentum then look for the selling to extend into the minor bottom at 9511.25, followed by an uptrending Gann angle at 9469.50.

If 9469.50 fails to hold as support then look for the selling to possibly extend into the next uptrending Gann angle at 9382.00, followed closely by the short-term 50% level at 9364.50 and the short-term Fibonacci level at 9270.50.

Side Notes

A close under 9733.50 will form a daily closing price reversal top. A close under 9632.25 on Friday will form a weekly closing price reversal top. These would be potentially bearish chart patterns.