COVID-19 Int'l Spread Only Game In Town

Leaked docs show China downplaying stats: More reports are coming to light that China is getting back to work with traffic congestion and pollution continue trending higher even if they remain below 2019 levels. However, the assumption that the novel coronavirus outbreak in China is much worse than the authorities want the public to believe gained further traction after leaked docs obtained by the Epoch Times revealed the outbreak in the Shandong province is much worse than the officially reported.

Will the containment measures work? While the World Health Organisation (WHO) said that the rate of new infections seems to be slowing in China, this is in contradiction with the early pattern seen in the rest of the world. But as the Research Team at the National Australian Bank notes, “the WHO found that the epidemic peaked and plateaued between the 23rd of January and the 2nd of February and provides some hope that containment measures could help stem the spread of the virus.”

The COVID-19 spread into the West keeps its course: Financial markets are still not buying into this ongoing weakness as investors remain cautious of the COVID-19 spread into the West with more international cases identified every day (Brazil, Greece Norway, Italy, Iran and South Korea…). While there has not been a whole lot of data to provide new drivers for the markets (latest developments here), the markets are largely trading based on the existing depressing mood from the negative headlines.

No respite for equities or bond yields: This glass half-empty approach in trading financial markets was well reflected in the behavior of equities in the US, initially opening with relatively strong gains of nearly 2% but succumbing back down as the day went by, with the S&P500 ending -0.1% at 3,124. Yields also continued to trend lower globally.

Oil losses $50.00 as stockpiles build up eyed: A market that remains tail-spinning below the $50.00/barrel is WTI, printing its lowest sub $49.00, not seen since late 2018. The main culprits include airline cancellations, travel curbs and quarantines, all leading to expectations of a major build-up in crude stockpiles.

EU-UK trade talks in focus: The Pound saw an intraday spike in the broader context of selling pressure after the top European Brexit negotiator Barnier said the EU is ready to offer UK super preferential access to EU markets. However, this ‘apparent’ positive headlines doesn’t change the equation a bit. The Sterling quickly gave back the gains, as Barnier reminded the market that “the EU-UK trade talks are set to be complicated with not much time to strike a deal…”

RBA rate cut further priced in for April: The coordinated intervention by Central banks to lower interest rates is a scenario that markets are decisively pricing in. Not only the market sees the Fed easing its policy by as many as 3 quarter cuts this year, but the bond traders are telling us, via the Australian fixed-income, that the RBA is also looking like a contender to lower rates, with an April move close to 50% chance.

Australian Q4 capex disappoints: The data came well below estimates at -2.8% q/q. This reading was a major miss, even if it referred to Q4 2019. The estimate 5 for '19-20 is seen at AUD 120bn (from 117 for the previous estimate, 4), while the 2020/21 estimate is for 100bn AUD. This news will be another drag on the Australian Q4 GDP, due Wednesday 4 March.

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The Daily Edge is authored by Ivan Delgado, Head of Market Research at Global Prime. The purpose of this content is to provide an assessment of the market conditions. The report takes an in-depth ...

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