Friday, January 31, 2020

BoE leaves interest rates unchanged; Amazon crushes analyst forecasts in latest earnings report

  • China
  • Dollar
  • Pound
  • Stocks
  • US earnings' season
  • Bank of England

BoE leaves interest rates unchanged; Amazon crushes analyst forecasts in latest earnings report

The World Health Organisation (WHO) declared the coronavirus an international health emergency after meeting on Thursday. Stocks in the US erased early losses as the WHO declaration gave investors hope that response efforts internationally will be stepped up. The DJIA, S&P500 and Nasdaq gained across the board. 

Amazon reported better-than-expected earnings on Thursday, beating analysts’ estimates for both sales (US$87.4bn versus US$86.2bn) and Earnings Per Share (EPS) (US$6.47/share versus US$4.11/share). It's shares jumped as much as 12% in after-hours trading.

The Bank of England’s (BoE) Monetary Policy Committee (MPC) voted 7-2 in favour of keeping rates unchanged at 0.75%. Cable jumped on the announcement to as high as 1.3110 while EUR/GBP fell to as low as 0.8412. But the central bank continued to adopt a dovish bias, cutting GDP forecasts and predicting inflation will only return to its target rate by the end of 2021, allowing sterling to recover slightly after sharply declining. Financial markets are now pricing in a rate cut by the last meeting of 2020.

Safe haven assets were mixed as a result of the WHO announcement. Gold fell by 0.16% or US$2.55 to end Thursday’s trading session at US$1,574.28. Yen gained slightly against the greenback, although this was more likely due to the dollar falling as household spending and core Personal Consumption Expenditure for Q4 2019 was lower than expected. US Treasuries were mostly flat on Thursday.

Brent crude oil futures suffered its biggest decline since the US-Iran conflict earlier this month, falling 2.54% or US$1.52 to end Thursday's trading session at US$58.29 per barrel. On Friday morning both Brent and WTI crude oil futures gained after the WHO said trade and travel restrictions were not necessary in response to the spread of coronavirus. WTI crude oil futures were 2.07% higher at US$53.22  per barrel as of 8.14am (GMT +4).

Asian stocks look set to track US stocks on Friday, especially after the manufacturing sector PMI in China met expectations to only fall slightly to 50.0 in January. Non-manufacturing PMI in China beat expectations, reaching 54.1 instead of the consensus of 53.0. The Nikkei and KOSPI started Friday's trading session 0.74% and 0.59% higher. On Friday morning, the number of confirmed cases of the coronavirus soared to 9,821 and the death toll climbed to 213.

Caterpillar (3.30pm), Exxon (4.30pm) and Chevron (7.59pm) is set to report their quarterly earnings later today (all timings in GMT +4).
Important economic releases for the day include Inflation (for January) and GDP (for Q4) for the Eurozone at 2pm (GMT +4) and the personal income report from the US which includes PCE, personal income and personal spending for December at 5.30pm (GMT +4).