Global stocks fall, risk assets soar on new coronavirus concerns
Global stocks declined today after Apple warned about impacts of the spreading coronavirus illness. The company, which is valued at more than $1.4 trillion, said that the disease will affect demand and supply of its products in China. The company said that its quarterly revenue will be lower than the $63 billion it had guided previously. This was not the only bad news today. HSBC, the biggest bank in Europe, said that it would slash its global workforce by 35,000. Most of these reductions will come from Europe and the United States. On a more positive note, according to the Wall Street Journal, Franklin Resources is expected to acquire Legg Mason, which is valued at more than $3 billion. It has more than $800 billion in assets under management. Later today, we will receive corporate earnings from companies like Advanced Auto Parts, Athene, Ecolab, Intercontinental Hotel, Medtronic, TransUnion, and Walmart.
Risk assets rose today as market participants continued to worry about the coronavirus. The Chinese health ministry said that 98 people had died from the disease in the past 24 hours. This brought the total number of global infections to more than 72k. This makes the disease one of the worst epidemics in modern times. This is not the only challenge facing the global economy. Market participants are starting to worry about a locust invasion that is happening in Africa and Asia. The locusts have cleared thousands of acres of crops, which could have a negative impact on the global economy in the long term. Risk assets like gold, Japanese yen, and the CBOE volatility index rose by 35, 20, and 12% respectively. The price of crude oil declined by more than 1%.
The sterling was relatively unchanged as the market reacted to mixed employment data from the country. The unemployment rate remained at 3.8% in December. The claimant count change came in at 5.5k, which was better than the consensus estimates of 22.6k. The employment change in December was 180k, which was better than the expected 145k. Wage growth was the main laggard. The average hourly earnings plus bonus rose by 2.9%. This was the slowest rate of growth since May 2018. It has been dropping after hitting 3.7% in August last year. Without bonuses, wage growth slowed from 3.4% to 3.2%.
The GBP/USD pair was little moved today as the market reacted to the mixed jobs numbers. The pair is trading at 1.2995, which is slightly higher than the day’s low of 1.2970. The price is along the 61.8% Fibonacci Retracement level on the hourly chart. It is also along the 14-day exponential moving averages. The average directional movement index has fallen from 50 to the current 29. The pair may move lower to test the 50% Fibonacci Retracement level at 1.2965.
The EUR/USD is trading at 1.0826, which is close to its lowest level since December 2016. The pair’s price has been in freefall this year, and has dropped by almost five percent. Still, the pair has been in a holding pattern since Thursday last week. This consolidation is evidenced by the short and medium-term moving averages. The RSI is at the neutral level of 40, while the momentum indicator has flattened. The pair may have bottomed, which means that a new upward trend is possible in the near term.
The XAU/USD pair has been on an upward trend since February 4, when it was trading at 1547.40. Today, the pair reached a high of 1590.35, which was the highest it has been since February 3. It is between the green channel that is shown below. It is also above the short and medium-term moving averages. The signal and histogram of the MACD is above the centreline. The likely scenario is that the pair may continue moving upwards as it tries to test the resistance level of 1595.00.