Market movers today
Focus in the short term will continue to be on the coronavirus in China and how fast it is spreading. Otherwise markets await the central bank meetings at Norges Bank and the ECB tomorrow.
On the data front today we will get UK CBI business confidence, US FHFA house prices and US existing home sales.
This afternoon Bank of Canada is widely expected to keep the policy rate unchanged at 1.75%.
Selected market news
The coronavirus, having killed nine people and spread among 430 in China, has now been detected in the US. The virus that spreads human-to-human has proved difficult to control and has already had its effect on markets, as the Hang Seng index fell some 3% earlier in the week partly due to concerns that the virus might spread further as next week brings the Chinese New Year with hundreds of millions travelling around the country as well as overseas during the holidays. Asia equity markets, however, recovered somewhat during tonight’s session with indices up slightly below 1%, but remain highly affected by news regarding the spreading of the virus and reached session-highs following reports that China will start nationwide virus screening processes.
Natural-gas prices are in free fall as futures quotes hit rock bottom yesterday at USD1.93/MMBtu, which is 33% lower than the average level in 2017 and 2018 and only beaten by a similar drop in January 2016. The drop is largely driven by yet another mild winter in the northern hemisphere combined with the steep increase in supply following the oil-related fracking of shale formations in the US, producing natural gas as a by-product, and supply is seemingly not abating as analysts expect US supply to increase another 2.9% in 2020. The winter usually brings down the stock-piling ongoing throughout the summer, but this time around stocks are only slightly below the levels seen at the peak in 2019. Gas futures do not price a return to 2017/18 levels until January 2030 and gas-related companies have underperformed the SP500 some 60%-points over the past year.
The impeachment inquiry against US president Donald Trump started in earnest on Tuesday afternoon and continued well into the night, with the agenda on the first day being the agenda itself – i.e. what schedule should the remainder of the trial follow? Initially senate majority leader Mitch McConnell had laid out a plan to allow for only two days each for the defence and prosecutors respectively to put forward their case, meaning that the daily conventions could last well into the night. This left democrats furious as this would prohibit extensive media coverage throughout the day, whereas the republicans would like to get things over with as soon as possible with the State of the Union on 4 February. Yesterday the senate settled on three days for each of the parties. The length of the trial is of course unknown, but if the Republicans can succeed in blocking new witnesses and evidence from being presented (requires a simple majority), two weeks seems doable.