Friday, January 24, 2020

Virus death toll reaches 25; the European Central Bank reveals little detail for framework review

  • China
  • Dollar
  • Euro
  • Stocks
  • European Central Bank

Market Recap: Oil falls for third straight session thanks to the virus outbreak in China

Stocks in the US closed Thursday mixed as upbeat earnings reports helped balance fears that the new coronavirus from China will negatively impact the global economy. Intel's shares surged in after-hours trading thanks to upbeat quarterly and full-year revenue forecasts. Look out for other chipmaker stocks such as Nvidia or Micron as well as they are likely to jump thanks to the better-than-expected outlook for the industry.

Major currencies were mixed against the dollar on Thursday. The euro fell 0.34% against the dollar on Thursday after the European Central Bank (ECB) kept rates and quantitative easing at current levels. As expected, the ECB launched their framework review and only revealed broad outlines for it. ECB President Christine Lagarde's remarks that there were signs of a moderate increase in underlying inflation pushed the euro up briefly before it retreated back down. In her statement, she also defended the decision to focus on climate change in the review which has drawn criticism since the announcement of the framework review.

Safe haven assets continued to advance on Thursday as the virus outbreak in China drives demand for lower risk assets. China implemented travel restrictions in the city of Wuhan to curb the spread of the virus on Thursday and expanded the restrictions to other cities in the Hubei region later in the day. The death toll jumped to 25 on Friday morning and the number of new cases spiked to over 650. Singapore and Vietnam have confirmed its first case of the virus while Japan has reported its second. Gold, yen and US Treasuries all rose on Thursday. Benchmark 10-year yields fell 4bps to 1.73%.

Oil fell for the third session in a row on Thursday thanks to the expanding virus outbreak. Brent and WTI Crude oil futures fell 1.85% and 2.03% respectively on Thursday.

Asian shares were slightly higher on Friday morning ahead of the Lunar New Year holiday, with the Nikkei, Hang Seng and Straits Times Index opening 0.23%, 0.09 and 0.02% higher on Friday. But the Nikkei retreated later in the morning, while the Hang Seng and Straits Times Index remained mostly flat.

American Express is set to report its quarterly earnings after the US stock market closes on Friday.

Economic releases for the day ahead include Markit Purchasing Managers’ Index (PMI) reports for Germany at 12.30pm (GMT +4), the Eurozone at 1pm (GMT +4), the UK at 1.30pm (GMT +4) and the US at 6.45pm (GMT +4).