Asia’s Morning: All Is Well With The World It Seems

Despite the spectre of coronavirus lurking over the world’s economy, all appears well with the world, judging by Wall Street’s overnight performance. China’s rate of new infections has plunged, even as coronavirus makes its presence felt in the far-flung corners of the globe. The Bank of Canada followed the Federal Reserve’s lead, announcing a 50-basis point cut in rates overnight, reinforcing the thesis that the world’s major central banks are embarking on a coordinated rate-cutting cycle to offset a coronavirus slowdown.

In the Democrat primaries, the establishment favourite, Joe Biden, swept Super Tuesday states. Only those almond milk latte-drinking greenies in California upset the organic apple cart. Siding with left-leaning Bernie Sanders, a definite non-favourite of Wall Street, Corporate America and the one per-centres. Having spent over $500 million of his own money, but with only American Samoa to show for it, Michael Bloomberg dropped out of the race and endorsed Mr Biden. With fellow liberal, Elizabeth Warren, a distant third, the race for the Democrat nomination is now a two-horse one with the momentum seemingly with Mr Biden.

The US Congress unveiled a $7.5 billion package to support coronavirus containment efforts in the United States. One suspects though, another cash call will be necessary if coronavirus does get itself established, but it was the sentiment that counted.

On the data front, the US ADP Employment showed that a respectable 183,000 jobs were added in February, underlining the resilience of the US economy. That is setting up markets for a hopefully unsurprising 175,000 jobs print for the Non-Farm Payrolls tomorrow in New York.

The convergence of these positive news threads was all the FOMO-gnomes of Wall Street needed. Wall Street stocks outperforming strongly, with the US Dollar also making back some of its previous day’s losses. Notably, gold held onto all its outsized gains from the day before, suggesting that calmer heads remain concerned about the real economy, and not short-term stock valuations.

The bond market certainly thinks so; the US yields in the 10 and 30-year tenors refusing to budge from record low yields. A US 10-year yielding 1.0%, and 30-year yielding 1.70%, are not the forward-looking indicators that pundits look for when forecasting a v-shaped recovery. They are, in fact, the very opposite. Rates this low imply the inflation is going to be non-existent for years to come, with its implications for growth not particularly special either. Perhaps the last couple of days should be looked at as some winter sunshine, and not as the imminent arrival of summer.

That winter sunshine has inevitably spilt over into Asia today, despite Australian exports and imports both slumping by 3.0% this morning for January. That story will be one for another day as the street prices in a feeding frenzy of new easings from the globe’s central banks. With very little of note on today’s Asian data calendar, markets attention will remain focused on the positive developments overnight, and any news emanating from OPEC+ meeting starting today.


Wall Street tracked higher sharply overnight, following Joe Biden’s strong primary performance, the expectations of easier central bank money to come and Congress approving a $7.5 billion coronavirus package. The S&P 500 jumped 4.22%, the Nasdaq by 3.85% and the Dow Jones leapt 4.52%.

As is Asia’s want these days, the movements of US stock indices futures in after-hours trading is dictating early moves in Asia. With the S&P e-minis falling slightly on profit-taking, Asia/Pacific markets are all higher, but not displaying the outright exuberance of Wall Street’s overnight session.

The Nikkei 225 is up 0.80%, the Kospi by 0.30% with the Shanghai Composite up 0.80-% and the CSI 300 by 0.55%. In regional markets, the Straits Times has climbed 0.60% and the Hang Seng by 0.55% with Jakarta up 0.80%. Downunder, the Australian All Ords is up 1.0% with the NZX 50 the star performer, climbing 2.0% today.

Equities should remain in positive territory for the day following another massive performance by Wall Street overnight, and no potential data banana skins to slip up the narrative.


The US Dollar found its footing overnight even as US Treasury yields remained anchored at record lows. The expectation that the world’s central banks would ride to the rescue yet again, along with a strong showing by Joe Biden in yesterday’s primaries, boosted the Dollar which was supported by flows reversing back out of haven positioning.

The EUR/USD fell 0.35% to 1.1135 reinforcing the thesis that concerted gains over 1.1250 will require another severe leg down in US yields. Expectations that the ECB will cut rates next week also eroded Euro support.

Fading coronavirus fears was also supportive of the Australian Dollar, which rose by 0.65% to 0.6625 overnight. The China-centric AUD still faces challenges at 0.6650 initially, but for now, the worst may be over for it and the New Zealand Dollar.

Offshore Yuan continued its comeback, USD/CNH falling by 0.40% to 6.9230 overnight. That leaves USD/CNH dead centre of its 6.8400 to 7.0600 range for 2020., quite the comeback. Unless coronavirus makes a sudden reappearance at scale in China, markets will continue to price in that the worst is over there. Instead, movements in the CNH will be dictated by the evolution of the crisis internationally, and not from within China’s borders.

Regional Asia should enjoy a modestly stronger day as virus fears recede for now, rightly or wrongly.


Oil has a volatile day as disagreements between OPEC and Russia emerged over the need for further cuts. Russia, unsurprisingly, does not feel the need to rush into more cuts. I suspect though; this is more a negotiating strategy ahead of the OPEC+ meeting today. It will be OPEC, and not Russia, doing most of the cutting.

Brent crude finished the day only 0.50% lower at $51.60 a barrel and WTI finished 0.20% higher at $47.20 a barrel. WTI was boosted late in the session by a fall in official US Crude Inventories to 785,000 barrels.

Both contracts have edged higher by 20 cents a barrel this morning. Gains will be limited though, even in this positive risk environment, as the market awaits the outcome of the OPEC+ two-day meeting today. Expectations are for a potential substantial cut by the grouping of between 1 to 1.5 million barrels a day. Russia is reluctant to do so, and to get that scale of reduction across the line, OPEC producers will have to wear most of the pain. The potential for disappointment is high, and a failure to deliver a meaningful reduction in production could see oil’s recent gains wiped out.


Gold held onto its recent gains overnight, even as the risk environment turned strongly positive on Wall Street. The anticipation of further central bank rate cuts, and continuing haven flows as coronavirus insurance, continued to underpin the yellow metal, even if it could not propel it higher. Gold finished the day almost unchanged at $1637.00 an ounce.

A sharp equity sell-off could see the margin call sellers return temporarily, but overall gold’s price action continues to look constructive. Unchanged in Asian trading, it has technical support at $1625.00 an ounce, with resistance at $1650.00 an ounce.



This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Jeffrey Halley

Jeffrey Halley

Senior Market Analyst, Asia Pacific
With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley is OANDA’s senior market analyst for Asia Pacific, responsible for providing timely and relevant macro analysis covering a wide range of asset classes. He has previously worked with leading institutions such as Saxo Capital Markets, DynexCorp Currency Portfolio Management, IG, IFX, Fimat Internationale Banque, HSBC and Barclays. A highly sought-after analyst, Jeffrey has appeared on a wide range of global news channels including Bloomberg, BBC, Reuters, CNBC, MSN, Sky TV, Channel News Asia as well as in leading print publications including the New York Times and The Wall Street Journal, among others. He was born in New Zealand and holds an MBA from the Cass Business School.
Jeffrey Halley
Jeffrey Halley

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