US stocks are losing momentum in what has been a very good start to earnings season as Asia braces for the impact of the coronavirus. Asian stocks were lower across the board as the virus spreads and concerns grow that China did not act fast enough to contain the virus. At least 17 people have dies and almost 600 have been sickened. China also had to quarantine Huanggang city, a city with a population of 7.5 million people. With Wuhan and now Huanggang city on lockdown, the fear is that food and medical supplies will become thin and that we could see more travel bans throughout China. The Lunar New Year holiday, which is normally a boom for travel and casino companies, will be a bust this year. Singapore also announced their first case of the Wuhan virus this morning.
Earnings results came in mixed this morning after strong results from Comcast but softer revenue from P&G. Union Pacific also reported results that showed a strong decline with carloads, but shares climbed higher after the outlook painted a rosier picture than what CSX forecasted last week.
The euro was little changed after the ECB kept rates steady and affirmed their stance on rates and bond buying. ECB President Lagarde for much of her press conference had hawkish hints on stabilizing inflation and an improvement on the risks to growth, but the euro refused to rally. The key takeaway of this ECB day was the launching of the first strategic review since 2003. Lagarde refrained from explaining her preference on what she would prefer the inflation strategy to be. The strategy review should be done by the end of the year and all decisions before then will independent of the review.
Much of Wall Street expects the ECB to be on hold this entire year. The euro will primarily focus on the upcoming German PMI data and IFO survey. If we continue to see better than expected data from Germany and optimism with the outlook, the euro could target the upper boundaries of its tight trading range.
Oil prices are getting battered by falling demand concerns that have stemmed from growing travel bans in China. China has quarantined Wuhan, a city of 11-million and Huanggang city, which has a population of 7.5 million. Oil is struggling to stabilize here since both the supply and demand side news have been mostly bearish. Oil can’t shake non-OPEC production oversupply concerns followed by fading optimism OPEC + will be able to continue to delivering production cuts deeper into 2020. Oil is resting on critical support and swelling supplies in the US could be the straw that breaks its back in the short-term.
Gold prices are softening despite a wave of risk aversion in Asia, as investors become skeptical the upcoming Lunar New Year holiday will see limited gold purchases from China. All the travel bans occurring in China have shifted the focus of many to securing food and medical supplies and not holiday buying of gold. Gold sellers are focusing on a barrage of bearish signals that include the possible formation of a death cross. The yellow metal has been a tight $30 range over the past two weeks and it seems that when it finally breaks momentum traders could help extend the move.
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