Trading Week Ahead: 3rd-7th February 2020
Key Events This Week
CNY Caixin Manufacturing PMI
USD ISM Manufacturing PMI
AUD RBA Rate Statement, Cash rate
NZD Employment Change,Unemployment Rate
AUD RBA Gov Lowe Speaks
USD ADP Non-Farm Employment Change
ISM Non-Manufacturing PMI
AUD Retail Sales, Trade Balance
EUR ECB President Lagarde Speaks
AUD RBA Gov Lowe Speaks
NZD Inflation Expectations
CAD Employment Change, Unemployment Rate
USD Average Hourly Earnings, Non-Farm Employment Change, Unemployment Rate
Coronavirus concerns continue
We witnessed the first signs of this outbreak affecting global markets last week, as traders jumped back into the JPY and there was a move away from risk assets like equities. As the days progressed, markets regained some composure despite the WHO ruling it a public health emergency with the death toll hitting 200. It was also reported that the total number of infections surpassed SARS. This week we see markets remaining very vulnerable to further updates around the outbreak and how it’s being managed. So far, China is doing a great job in containing the virus, but any type of negative development could see strong selling redevelop in the risk market.
Will it be a breakout week for the US?
U.S. earnings is a further factor to watch this week with fresh reporting due out on 3rd February, US time. Amazon jump-started the Nasdaq last week, after a week dominated by uncertainty. With another big name set to report this Monday after market close, it’s time to discuss the fourth-quarter earnings of Alphabet’s Class A and C shares. Opinions also still remain split regarding the state of the US economy with last week’s advance GDP coming in at 2.1% as expected. Friday traders will be looking for more clues in the jobs report.
New lows for AUD?
After a lot of talk regarding Australian rates being at a stable spot, the expectation has now moved to the cut side with the market looking for a 25 point cut this Tuesday from the RBA. Recent Australian data has been mixed with some wins, but the view on the economy remains negative. If we see a cut this will take the Australian cash rate to a new record low of 0.50%. At 2:30 pm if the RBA cuts rates, we would be looking for a possibility of a weaker AUD and a stronger ASX. If they hold, we would be looking for the reverse.
This week’s chart is of the HK50 weekly (Hang Seng) and it really shows how certain localised influences can affect markets. Here it shows how the two weeks of sharp selling line up with the development of the coronavirus.