Market movers today

German IFO is today’s main release. The key part is gauging as to what extent companies are concerned about the current situation, as global trade has declined significantly on the back of the coronavirus.

While the daily increase in people infected with coronavirus continues to decline, concerns are as to the virus spreading more seriously across Asia. We follow this on a day-to-day basis and over the weekend, Italy has started to make headlines.

- advertisement -

During the week several FOMC members are due to speak but we do not think they will change the current signal of being on hold. The Fed, however, is feeling increased pressure with investors pricing in two expected cuts over the next 12 months.

Tomorrow, the EU is set to agree on the final negotiation objectives ahead of the EU-UK trade negotiations (set to start in the week beginning 2 March). Tensions between the EU and the UK have been rising, as the UK continues to rule out following EU rules, while the EU says it cannot offer a deal similar to the EU-Canada trade deal.

Selected market news

News flow continues to focus on three topics: (1) matching incoming data on economic activity versus downbeat expectations, (2) the contagion of the coronavirus in China and elsewhere and (3) markets increasingly pricing in a cyclical slowdown jointly with lower levels of expected inflation.

Friday’s PMIs did little to change the impression of persistent downside risks to the global economy. In Europe, declining new export orders and widespread delivery delays do not bode well for the short-term cyclical outlook. We look for a further dip in the March readings once the full impact of the China shutdown starts to come through but resilience in services is encouraging. So far, PMIs would point to 0.2% q/q growth in Q1.

However, disappointing US PMIs were far more important given the USD outlook being highly dependent on markets’ perception of US macro risks. This release was a spook to markets and we saw the dollar pare gains and rising odds of further interest rate cuts.

Over the weekend, Italy has imposed quarantine across many towns in the northern region as officials aim to contain the further spread of the coronavirus. While such so far and by itself has limited economic impact, this continues to add to a global picture of further short-term economic downside.

Asset classes are performing as expected with gold rising, equities being a bit in red and bond yields moving to new lows together with declining inflation expectations in both Europe and the US. In emerging markets, the weak sentiment continued as well. For example, we saw MXN pare some of the strong gains of recent months, thus questioning yet another pocket of market strength. Over the weekend, the dollar has made strong gains, notably so against EUR, SEK, NOK and most major EM currencies. In equities, Korea’s KOSPI is down over 3% and Australian equities are printing -2%. Market momentum thus appears being for more of the same, as per the above.

Previous articleInterest Rate Sensitive Names Drop In Shanghai Amid Calls For More Aggressive Monetary Policy
Next articleFOMO Dip Buying Losing Popularity
This publication has been prepared by Danske Markets for information purposes only. It is not an offer or solicitation of any offer to purchase or sell any financial instrument. Whilst reasonable care has been taken to ensure that its contents are not untrue or misleading, no representation is made as to its accuracy or completeness and no liability is accepted for any loss arising from reliance on it. Danske Bank, its affiliates or staff, may perform services for, solicit business from, hold long or short positions in, or otherwise be interested in the investments (including derivatives), of any issuer mentioned herein. Danske Markets´ research analysts are not permitted to invest in securities under coverage in their research sector. This publication is not intended for private customers in the UK or any person in the US. Danske Markets is a division of Danske Bank A/S, which is regulated by FSA for the conduct of designated investment business in the UK and is a member of the London Stock Exchange. Copyright (©) Danske Bank A/S. All rights reserved. This publication is protected by copyright and may not be reproduced in whole or in part without permission.


Please enter your comment!
Please enter your name here

This site uses Akismet to reduce spam. Learn how your comment data is processed.