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10.02.2020

Weekly market overview: Markets trim losses but investors remain alerts as virus keeps spreading

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- Stocks were higher for the most part of the week, with profit taking prevailed on Friday;
- Dollar gained against the majors amid upbeat economic updates;
- US employment data exceed expectations, confirm the strength of the job market;
- Euro dipped to four-month lows, turning the 1.10 handle into resistance;
- Oil prices remained depresses due a virus crisis, to OPEC-related uncertainty

Asian equities


After a week-long rally, Asian stock markets declined on Friday, mostly due to profit-taking following a rise on easing concerns over the China virus crisis. Earlier in the week, stocks received a decent support from the Chinese policymakers that announced measures to support an economy jolted by a coronavirus outbreak. China’s central bank lowered the interest rates on reverse repurchase agreements by 10 basis points and also injected a total of 1.2 trillion yuan into money markets through reverse bond repurchase agreements. The injection was one of 30 measures announced by Chinese authorities to buttress the economy against disruption from the outbreak.

However, as investors have digested the measures taken and shifted back to the spreading disease, stocks turned lower during the last trading day of the week. Hong Kong, which has climbed nearly 4.5% during the week, dipped 0.5% on Friday, while Tokyo went into the break 0.1% down. Shanghai was slightly lower, having recovered the majority of its near eight percent drop suffered at the start of the week, when it reopened after the Lunar New Year break.

US equities


US stock markets declined on Friday after a positive week amid renewed concern the coronavirus will slow global growth. As such, the S&P 500 Index had to halt its four-day rally. The Dow Jones Industrial Average closed nearly 1%, to 29,102.51. The S&P 500 dipped 0.5% to 3,327.71. The Nasdaq Composite slid 0.5% to close at 9,520.51. On a weekly basis, the S&P 500 gained more than 3%, the Dow climbed 3% while the Nasdaq gained 4%.

The decline was not only due to profit-taking but also amid the renewed concerns over the China coronavirus. As such, China’s National Health Commission on Friday confirmed 31,131 cases of the deadly virus in the country, with 636 deaths. Unsurprisingly, the numbers brought back worries about how China’s economy will be affected.

As for corporate news, Uber Technologies Inc shares rose 8.5% after the company revealed an ambitious plan to be profitable by the end of 2020. Caterpillar and Boeing fell 2.8% and 1.6%, respectively. Goldman Sachs shares dropped more than 1%.

Currencies


The greenback gained due to a series of positive economic data out of the United States. IHS Markit U.S. Manufacturing PMI arrived at 51.9 in January, up slightly from the flash figure of 51.7, but down from 52.4 in December. ISM Manufacturing PMI came in at 50.9 last month, the highest level since July, from an upwardly revised 47.8 in December. U.S. factory orders increase 1.8% in December. Private payrolls soared in January, registering the best monthly gain in nearly five years while business activity growth accelerates to 10-month high in January. Meanwhile, January’s ISM non-manufacturing index arrived at 55.5 versus 55 expected. US productivity rebounded in the fourth quarter as labor costs growth slowed and weekly jobless claims came in at a nine-month low, with productivity rebounding. As for the key release, non-farm payrolls increased by 225,000 jobs last month while unemployment rate rose to 3.6%. As for the federal Reserve, Quarles said that interest rates were in good place despite notable risks.

In currency pairs, EURUSD dipped to fresh four-month lows around 1.0940 and extended losses to the 1.0925 area on Monday as risk sentiment remained fragile after a short-lived recovery. Also, the common currency was pressured by unexpectedly strong economic data from the US that further eased worries over the potential recession in the country. Besides, White House economic adviser noted that he didn’t see U.S. economic ‘disaster’ from coronavirus. As a result, the pair failed to stay above the 1.10 handle and accelerated the decline on a break below this former support which turned into a resistance.

Commodities


Meanwhile, oil prices suffered another week of losses and fell to fresh multi-month lows below $54, with Brent shed over 6% for the week ending February 7. As a result, the futures saw the longest streak of weekly drops since 2018. Brent remained under the selling pressure as the coronavirus outbreak continued to cloud the demand outlook while market participants awaited the OPEC+ decision on extra cuts in production. On Wednesday, the U.S. Energy Information Administration reported a build of 3.355 million barrels of crude oil inventories during the week ending January 31, which was more than an expected increase of 2.831 million barrels. Another source of weakness was a stronger dollar that finished the week at its highest since October 2019 after five consecutive days of increase. As long as virus concerns remain in focus, Brent will stay under the selling pressure, but once the decease starts to abate, buyers may reemerge and send the futures back above the $60 handle.