Yesterday’s Asia rebound once again proved to be a dead cat bounce as minimal gains were wiped out in the US session. Microsoft fell after hours after it cut sales forecasts for this quarter, which piled pressure on US indices during the Asian morning. The US30 and SPX500 indices both fell more than 0.7% while the NAS100 index declined 0.68%.

US30 losses since the mid-February peak have now reached 10%, those for the NAS100 are at 10.75% while the SPX500 has declined 9.5%. A 10% reversal is often seen as a signal of a reversal in the recent market trend.

US30USD Daily Chart

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Bank of Korea surprises

The Bank of Korea kept its benchmark rate unchanged at 1.25% at this morning’s policy meeting, surprising the majority of surveyed economists who’d expected a 25 bps cut to be delivered. The decision was not unanimous, with two dissenters calling for a cut. Economic projections were updated, resulting in a cut to the 2020 GDP growth forecast to 2.1% from 2.3% while the CPI forecast for the year was affirmed at 1.0%.

In the subsequent press conference, BOK Governor Lee said the prior two rate cuts seem to be working (July and October last year) and have had a positive impact on the economy. He acknowledged that the CoVid-19 outbreak had affected consumption and exports, but thought more time was needed to gauge the full impact. He also noted that a GDP contraction in Q1 was possible.

CoVid-19 update

The US has identified its first CoVid-19 case without ties to the outbreak. President Trump tweeted that the virus will probably spread to the US, and travel from places such as Italy and South Korea may need to be restricted, but now is not the time. Plans are in place for much larger scale quarantines if they are need.

As at 11.30am Singapore time, the total number of confirmed cases globally has reached 82,163 spread across 35 countries, with 2,800 virus-linked deaths reported. South Korea’s total has jumped to 1,595 while Italy’s stands at 453 (Source: Johns Hopkins University).

US GDP revision

The GDP growth numbers for the fourth quarter are set to be left unchanged at today’s update. Surveys suggest growth will remain at +2.1% annualized. Other US releases scheduled today include durable goods orders for January, which are estimated to have fallen 1.5% after a 2.4% gain in December. We also have pending home sales for last month and the Kansas Fed manufacturing activity index for February. That’s expected to slide to -5 from -4.

Prior to the US data, we have a number of sentiment indicators from the Euro-zone for this month. Industrial and consumer confidence are both seen unchanged at -7.3 and -6.6, respectively while the business climate is expected to worsen to -0.28 from -0.23 and the services sentiment index probably improved to 11.2 from 11.0.

Central bank speakers include the Bank of England’s Cunliffe, Lane and De Guindos from the ECB and Evans from the Federal Reserve.

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