MARKET BRIEFING: Monday 10th February 2020
Monday: JN Current Account, Economy Watchers Current Index, CN CPI/PPI, IT Industrial Production, EU Sentix Investor Confidence, US CB Employment Trends Index, CA Housing Starts, Building Permits, Fed's Bowman, Harker Speak
Tuesday: JN Market Holiday, AU NAB Business Confidence, Home Loans, UK GDP (P), Industrial/Manufacturing Production, Business Investment, Construction Output, Trade Balance, NIESR GDP Estimate, US NFIB Small Business Optimism, JOLT's Job Openings, WASDE Report, Weekly API Inventories, 3-yr Auction, ECB's Lagarde, BoE's Haskel, Fed's Powell Testifies (House), Quarles, Bullard, Kashkari, RBA's Heath Speak, EU Earnings: Daimler, US New Hampshire Democratic Primary
Wednesday: JN Machine Tool Orders, AU Westpac Consumer Sentiment, NZ RBNZ Interest Rate Decision, GE 10-yr Auction, EU Industrial Production, WR OPEC Monthly Report, US DoE Inventories, 10-yr Auction, Federal Budget Balance, Fed's Powell Testifies (Senate), Harker, RBNZ Orr Speaks
Thursday: JN PPI, AU MI Expectations, CN FDI, GE CPI (F), FR Unemployment Rate, IT 3/7/30-yr Auction, UK RICS House Price Balance, US CPI, Weekly Jobless Claims, 30-yr Auction, ECB's de Cos Speaks
Friday: CN Outstanding Loan Growth, New Loans, M2 Money Stock, SP CPI, IT Trade Balance, GE/EU GDP (P), Trade Balance, US Retail Sales, Industrial/Manufacturing Production, Import/Export Price Index, Business Inventories, Michigan Consumer Sentiment (P), Baker Hughes Rig Count, Fed's Mester, BoJ's Amamiya Speak, UK Earnings: AstraZeneca, RBS, Munich Security Conference Starts
MACRO OVERVIEW: Sunday 9th February 2020
CORONAVIRUS: NUMBER UP/IMPACT DOWN
The impact of coronavirus is still under the microscope but for intraday traders the importance continues to decrease. While numbers continue to grow (37,590 total confirmed cases, 814 deaths at the time of writing), 96% of deaths have been in Hubei in mainland China, with still limited spread elsewhere globally.
Although there has been lots of noise about the validity of China's reported statistics and that the numbers of deaths have now exceeded the SARS outbreak of 2003, I think traders will continue to focus on other topics this week with just a moderate degree of vigilance on the development of the virus.
POWELL'S SEMI-ANNUAL TESTIMONY
Historically, this has been an important platform for the Fed Chair to outline their latest economic assessment and policy view. However, given recent strong data from the US I would expect the event to largely repeat that economic fundamentals in the US are sound and that a "material change" is required to shift their view. On this basis, although the coronavirus will have a marked impact on the global economy I do not foresee this being enough to facilitate any immediate changes in the outlook.
For any new traders, Powell's testimony to the House Financial Services Committee on Tuesday is the market moving event with Wednesday's follow up simply a copy, paste and repeat to the Senate Banking Committee.
A GERMAN CONTRACTION
German industrial production for December slumped 3.5% last week, marking the largest decline in industrial activity since January of 2009. This in combination with other weak data from Europe's most important economy will likely see German GDP contract for the second time in the last three quarters on Friday leaving EUR/USD susceptible to more downside in context of the resurgent USD.
As a reminder, ECB President Christine Lagarde is also due to speak at European Parliament on Tuesday.
THE IMPORTANCE OF LIBYA
Recent weeks have seen Libya's crude output decline to its lowest in 8 years, heavily impacted by the on-going conflict between the internationally backed Tripoli government and General Khalifa Haftar. Although Libya is one of the smaller producing nations within OPEC, peace talks happening today in Cairo could have wider implications on how Saudi Arabia and Russia act in the near future. Any political accord that would lead to a deescalation in the conflict could quickly see production rates rise by approximately 1mbpd, a prospect which will only heap further pressure on OPEC+ to deepen their supply cut agreement in the wake of the epidemic in China.
At the end of last week WTI crude managed to stay above a key technical area of support (~$50/bbl) but Libya could well be the next fundamental catalyst to bump prices down, and with the technical relevance of these price points a quick move down to 45/bbl would not be surprising. If this were to materialise then expect OPEC+ to swap words with real action and under this scenario anything short of a +750kbpd cut would be a disappointment for markets.
EARNINGS SEASON DRAWS TO A CLOSE
64% of the S&P 500 have reported thus far with another 65 due this week. Most of the big household names have reported already in what otherwise has been a fairly uneventful season given the other big macro themes in play.
Highlights Stateside include Alibaba Group, Cisco and Pepsico with FTSE 100 heavyweights AstraZeneca and RBS reporting at the end of the week.
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