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Stocks rise, dollar slips after Powell leaves door ajar

EQUITIES

Asian equities are pushing higher overnight. China reporting the lowest number of new cases of the coronavirus since January keeps the prospect of a pandemic at bay. China’s CSI 300 is flat today but has risen the prior six days in a row and is up 8% from the lows.

The Dow and S&P 500 notched up record highs, boosted by the approval of the T-Mobile and Sprint merger. Stocks finished higher but ended well off daily peaks in signs of little reticence that the Fed is ‘closely monitoring’ the coronavirus. Our main takeaways from Fed Chair Powell’s testimony to Congress were that 1. Deeming the treasury purchases a success and the word ‘gradual’ in plans to stop using repo operations is good from a liquidity justification to be long stocks, but 2. Crystallising the threat of the coronavirus is not so good from an economic perspective.

The DAX looks set for a higher open after 1% gains on Tuesday. The FTSE 100 looks ready to open back above the 7,700 threshold. Looking now at the STOXX 600 at record highs and up 6 of the last 7 days, it looks like markets have already priced in a big 2020 earnings recovery. If the coronavirus, or some other black swan does throttle the expected recovery come Q1 earnings season, then we could be in a tricky spot.

 

FOREX

The New Zealand dollar s the top FX-mover overnight following the RBNZ decision to keep rates on hold. The decision was anticipated but a message of now more cuts this year saw the Kiwi climb 0.9%.

The dollar was lower yesterday because it felt like Jay Powell left the door slightly ajar for a rate cut this year. It seems that one cause for the Fed to adjust its plans and lower interest rates again is the coronavirus. We would look at any US dollar weakness as a correction. When all the CB’s are eyeing the coronavirus as a possible reason to add policy accommodation, the USD should still be favoured when the US economy is outperforming others.

21-2-2020

Dollar index headed for 100, Korea’s KOPSI at sharp end
The sudden shoot up in the number of coronavirus outside of China has seen sentiment sour again across markets. The Japanese yen, Korea’s KOPSI are under fire, automaker shares might be next, and the dollar and gold are the places of choice to take cover. Aut… Read more

18-2-2020

Shares fall, gold pops after Apple & HSBC coronavirus warnings
INDICES Stocks in Europe look set for a weaker start after a fall in Asia while US futures point to a lower open on Wall Street. It’s a reaction to major companies warning the coronavirus outbreak will eat into the current quarter’s earnings. Heavy losses and… Read more

17-2-2020

Another China rate cut & Japan nearing recession
Wall Street is closed today for Presidents Day so that should mean thinner trading in general. The number of new coronavirus cases has gone up in China but new stimulus measures from the Chinese central bank is putting investors at ease. The PBOC has cut ‘med… Read more

13-2-2020

Euro hits 2 ½ year low, Coronavirus infections spike
China authorities have been under-stating reported cases of the coronavirus. A new methodology of diagnosis is apparently behind a sudden spike in the cases and deaths resulting from the coronavirus on Thursday. The top Communist party official in Hubei Provin… Read more

12-2-2020

Stocks rise, dollar slips after Powell leaves door ajar
EQUITIES Asian equities are pushing higher overnight. China reporting the lowest number of new cases of the coronavirus since January keeps the prospect of a pandemic at bay. China’s CSI 300 is flat today but has risen the prior six days in a row and is up 8%… Read more

11-2-2020

Central bankers expected to underpin stocks while LNG dives as Coronavirus claims 1000 lives
There have now been more than 1000 deaths from the coronavirus with 42,700 cases. That makes a mortality rate at 1% according to Imperial College London. Tesla and Ford are returning to production in China but others including GM are still closed until next we… Read more

10-2-2020

Equities pullback, PBOC lending & higher inflation help CNH
The rate of new virus cases is slowing, and investors stepped heavily back into risky assets last week. A little caution was on display come Friday which is running through to Monday. Workers at the Foxconn factory in Zhengzhou getting the go-ahead to return… Read more

7-2-2020

Europe joins the rally plus unicorn earnings & NFP
EQUITIESGlobal stock markets have been blessed with four straight days of gains this week. Whether we can get five-for-five will probably rest with the monthly US jobs figures later. On Thursday, the Dow Jones and S&P 500 rose 0.3% to hit record highs. It… Read more