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European Markets Crash on Coronavirus Outbreak in Italy, Risk Aversion Intensifies

Global markets are clearly in deep risk-off mode today. In particular, with the sudden explosion in coronavirus cases in Italy (150 infections and 4 deaths), European stocks are suffering their biggest plunge since 2016. Italian stocks leads the decline, down -4.5%. South Korea is even worse (833 cases and 8 deaths) while KOSPI dropped -3.9%. Gold hits 7 year high at 1689 while WTI crude oil dives nearly -4%. DOW future is currently down more than -800 pts at the time of writing. US 10-year yield is down -0.0916 at 1.383, with 1.4% handle broken.

The currency markets is comparatively quiet. Yen, Dollar and Swiss Franc are currently the strongest ones. Canadian Dollar is the weakest, as pressured by falling oil prices. Sterling follows as the second weakest, and then Australian Dollar. Technically, USD/CAD’s pull back from 1.3329 should have completed at 1.3202 and retest of 1.3327/9 resistance zone should be seen next. Decisive break there will affirm near term bullishness for retesting 1.3664 medium term top. EUR/CHF is finally picking up downside momentum. Recent down trend should target 1.0394 projection level next.

In Europe, currently, FTSE is down -3.41%. DAX is down -3.97%. CAC is down -3.92%. German 10-year yield is down -0.056 to -0.485. Earlier in Asia, Japan was on holiday. Hong Kong HSI dropped -1.79%. China Shanghai SSE dropped -0.28%. Singapore Strait Times dropped -1.22%.

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German Ifo business climate rose to 96.1, economy seems unaffected by coronavirus developments

German Ifo Business Climate rose to 96.1 in February, up from 95.9, beat expectation of 96.0. Current Assessment index rose to 93.4, up from 92.9, beat expectation of 93.3. However, Expectations index dropped slightly to 98.9, down from 99.1, missed expectation of 99.0.

Clemens Fuest, President of the ifo Institute, said, “the German economy seems unaffected by developments surrounding the coronavirus. The survey results and other indicators suggest economic growth in the first quarter will amount to 0.2 percent.”

Looking at some details, manufacturing index rose from -1.6 to -1.3, staying negative for the eighth straight months. Services index dropped for the third month, down form 18.8 to 17.3. Trade index dropped form 2.2. to 1.0. Construction index dropped from 13.5 to 13.1.

Mnuchin: Coronavirus has no material pact on US-China trade deal phase 1

US Treasury Secretary Steven Mnuchin said in Reuters interview that outbreak of Wuhan Coronavirus in China is not going to have any material impact on US-China trade deal phase one. He said, “I don’t expect that this will have any ramifications on Phase 1. Based on everything that we know, and where the virus is now, I don’t expect that it’s going to be material.”

Though, he cautioned that “obviously that could change as the situation develops. Within the next few more weeks, we’ll all have a better assessment as there’s more data around the rate of the virus spreading.”

Meanwhile, the outbreak also delays the start of phase two negotiations. But Mnuchin isn’t worried about the time frame for now. “If we get the right deal before the election, that’s great. If we get the right deal after the election, that’s great. We don’t feel any pressure one way or another,” he said.

New Zealand retail sales rose 0.7% in Q4, ex-auto sales up 0.5%

New Zealand retail sales rose 0.7% qoq in Q4, slightly below expectation of 0.8% qoq. Ex-auto sales rose 0.5% qoq, below expectation of 0.9% qoq. Electrical and electronic goods retailing had the largest rise of all 15 industries in the December 2019 quarter. After adjusting for price and seasonal effects, the sales volume of electronics was up 4.3 percent, following a 4.4 percent rise in the September quarter.

Coronavirus explosion puts pressure on BoK easing

Explosion of coronavirus cases should further delay South Korea’s economic recovery, leading Bank of