U.S. equities rose to records, tracking European and Asian stocks higher, as optimism grew that the global economy can recover from the impact of the coronavirus amid signs the spread of the illness is slowing. Crude rallied and Treasuries fell. The S&P 500 Index and Dow Jones Industrials hitting all-time highs, after China's Hubei province reported the lowest number of new virus cases this month and suspected infections on the mainland declined. Carmakers and miners led the advance in the Stoxx Europe 600 Index, even as data showed a deep slump in euro-area industrial output at the end of last year. Asia saw gains for most equity benchmarks, with those in Shanghai and Hong Kong outperforming. Oil climbed to around $51 a barrel in New York, holding the advance even after OPEC slashed forecasts for global demand and U.S. inventories came in higher than estimated. Raw materials including copper and iron ore gained, while core European bonds tracked Treasuries lower and gold and the yen also slipped. New Zealand's dollar jumped the most in about two months after its central bank said the impact from the virus will be short-lived and it doesn't project a need for rate cuts this year. Confidence is increasing among some investors that the impact of the coronavirus outbreak will ultimately prove short-lived. President Xi Jinping vowed China would meet its economic goals while winning the battle against the virus that has now claimed 1,115 lives, while Federal Reserve Chairman Jerome Powell said on Tuesday the central bank is keeping a close eye on fallout from the epidemic. Meanwhile, peripheral European bonds bucked declines and the yield on 10-year Greek debt dropped below 1% for the first time.
U.S. equities climbed as investors digested the latest views from Federal Reserve Chair Jerome Powell. Oil rose and Treasuries slipped. The S&P 500 gained for a second day, led by the technology and consumer-discretionary sectors. In prepared remarks released earlier, the Fed chair said the U.S. central bank is keeping a close eye on fallout from the deadly coronavirus outbreak in China. Equities seem to be enjoying momentum following another record close in the U.S. on Monday.
Steve Brown, Senior Corporate Trader | Stevebrown@vbce.ca
The CAD broadly recovered as the risk aversion flows were largely reversed from the previous week. North American equity markets rallied strongly for four consecutive days to new historical highs before a slight pull-back on Friday as coronavirus fears largely dissipated. The outbreak appears to be stabilizing and many companies in China are set to resume operations. The USD was the best performing currency on the week with the CAD and AUD close behind. USDCAD climbed from 1.3232 up to 1.3302 Monday before falling back to 1.3264 despite a 4% drop in oil prices on Tuesday. Wednesday saw another test of 1.33 before a 5% rebound in oil prices saw USDCAD fall back to 1.3263. A much stronger than expected U.S. ADP employment reading led the USD broadly higher taking USDCAD back up to 1.3302. That level was rejected again with a move down to 1.3273. Thursday's session saw more of the same with another test of 1.3300 followed by a decline to 1.3283. Risk aversion crept into the markets on Friday and that prompted a move to 1.3316/21 in USDCAD – equivalent to the December 2019 high. Canadian employment data was surprisingly strong on all fronts sending USDCAD down to 1.3278. The move was short-lived with the pairing settling near 1.3300 into the close. U.S. headline jobs data was also better than expected although there was a large negative revision of 514,000 jobs to 2019 data.
The USD/CAD pair finally broke down of its European session consolidation phase and jumped to four-month tops, around the 1.3325-30 region in the last hour. Following an early dip to sub-1.3300 levels, the pair managed to attract some dip-buying interest and turned higher for the fourth consecutive session, also marking its 8th day of a positive move in the previous nine. As investors looked past Friday's upbeat Canadian monthly employment details, a softer tone surrounding crude oil prices undermined the commodity-linked currency -the loonie- and helped regain positive traction. Oil extended its recent bearish trajectory and remained depressed amid concerns over the hit in demand from the world's largest importer, China, following the outbreak of the deadly coronavirus. It is worth reporting that oil recorded its 5th consecutive week of losses, which has resulted in combined losses of more than 22% and points to a well-established near-term bearish trend. Meanwhile, the momentum seemed rather unaffected by a subdued USD price action, which possibilities of some follow-through technical buying above the 1.3300 mark contributing to the positive tone. In absence of any major market-moving economic releases, the pair seems more likely to continue with its appreciating move as the focus now shifts to the Fed Chair Jerome Powell's testimony on Tuesday.
Yesterday, USDCAD dipped from 1.3290 down to 1.3270 before climbing to 1.3304/09. This was the highest since Dec. 3, 2019. The October, November, and December 2019 highs come in at 1.3340, 1.3327, and 1.3321 respectively. The move to 1.3300 (4th consecutive test of this level this week) was brief and USDCAD settled in a 1.3283-94 for the balance of the day. USDCAD tested the Dec. high ahead of the employment reports as equity markets eased lower while the USD and JPY broadly gained. Canada's data was better than expected including 35,400 full time jobs and rising wages. The U.S. data was mixed with stronger headline data coupled with softer wage growth and a negative 514,000 revision to 2019 data. USDCAD declined to 1.3279 but bounced back to 1.3318. The pairing has since fallen back to 1.3300.
U.S. stocks touched an all-time high as China's plans for tariff cuts on American imports and a slate of positive earnings reports overshadowed lingering concern about the economic hit from the coronavirus. The S&P 500 was up more than 3% for the week as it edged higher Thursday, with companies focused on consumer staples faring the best. Stocks gained in Europe and soared in Asia after China said it will lower levies on $75 billion of U.S. goods next week, adding a tailwind to growth. While some warn of complacency among investors, others flag support from central banks and recent economic indicators showing an expansion.
U.S. stocks pared gains after a torrid rally took them within a whisker of records, with investors watching developments in efforts to battle the coronavirus. Crude oil rallied after tumbling into a bear market. The S&P 500's 3-day gain topped 3% before concern mounted that the run had gone too far given the still-uncertain economic impact from the deadly virus. Sentiment had gotten a boost overnight after a string of reports on possible vaccines or treatments for the deadly pathogen, but the World Health Organization later said there are no proven therapeutics. Treasuries retreated, sending 10-year yields above 1.63%, even as more quarantines were announced in an effort to control the virus. West Texas crude headed for its first gain in 6 sessions. Havens including the yen and Swiss franc slipped. The dollar edged higher as data showed U.S. firms added more jobs than economists' forecasts in January. Investors are riding optimism amid a better-than-forecast corporate earnings season while weighing warnings about the impact of the illness and the latest reports on containing the virus. United Airlines and American Airlines both suspended flights to Hong Kong for a time due to a drop in demand. More central banks signaled a willingness to act if the virus undermines demand, inflation and financial markets.
U.S. stocks rallied with crude and copper, while Treasuries plunged as investors speculated the global economy can withstand the impact from the still-spreading coronavirus after China's market sell-off eased. The S&P 500 headed for its best two-day surge since October, with 10 of 11 main groups advancing Tuesday. European equities jumped 1.5% and emerging-market shares rallied the most in five months. The risk-on mood gained steam after Shanghai stocks rebounded from a record $720 billion wipeout and the offshore yuan recouped the previous session's decline. Treasuries slipped with gold. Oil jumped back over $50 a barrel and copper looked to halt a 14-day retreat.
Yesterday, USDCAD climbed from 1.3195 up to 1.3228 before falling to 1.3190. U.S. 4th quarter GDP data was as expected while the DJIA staged a late recovery with a 400pts swing to finish in positive territory. Oil prices also enjoyed a 3% surge in later trade. Overnight, USDCAD climbed for the 5th out of 6 days towards a 7 week high at 1.3244. Canadian GDP came in a touch better than expected sending USDCAD down to 1.3220. The pairing has since re-tested 1.3235 as risk aversion flows take hold with the DJIA down 400+ pts and oil prices near 1 year lows. With businesses closing in China and travel coming to a halt, there is diminished demand for oil and other commodities. The commodity bloc (CAD, AUD, NZD) have been the worst performing currencies these past 3 weeks after a strong finish to 2019.
Coronavirus concerns are still at the fore of all market watchers as its spread is roiling markets and upending all other economic news. A cruise ship owned by Carnival Corp. was blocked from leaving an Italian port with some 7,000 people on board, after a passenger came down with symptoms that raised concerns about a possible case of coronavirus. FEAR continues to grip the markets.
After rising to its highest level in more than a month at 1.3206 on Tuesday, the USD/CAD pair lost its traction and closed the day yesterday in the negative territory as the decisive recovery witnessed in crude oil prices helped the commodity-sensitive CAD find demand. With the market action turning subdued ahead of the FOMC's monetary policy announcements, the pair is consolidation Tuesday's losses and was last seen trading at session high of 1.3208. The barrel of West Texas Intermediate, which erased nearly 8% in the last 10 days on heightened fears over the negative effect of the coronavirus on oil demand, rose more than 2% on Tuesday and has been moving sideways near $54 since the start of the day on Wednesday. Later in the day, the FOMC will release its policy statement and Chairman Jerome Powell will be delivering his comments on the policy outlook in a press conference. Previewing this event, it is too early for the Fed to react to the recent sell-off. During the Q&A session at the press conference starting 11:30am, Powell is likely to be asked about his views on the recent development but we expect him to state that it is one of the risks the Fed is monitoring, in other words, the Fed is probably not going to strike a dovish tone given the labour market continues to tighten and private consumption growth remains solid.
U.S. stocks stabilized as investors monitored efforts to contain a deadly virus outbreak in China, though bond markets briefly flashed a recession signal for the first time since October. Meanwhile the market is shifting its attention to tomorrows U.S. Federal Reserve interest rate decision.
Stocks slumped and bonds rallied as intensifying concern over the impact of the deadly coronavirus rattled markets around the world. The S&P 500 Index slid the most in almost four months, with tech and energy companies leading losses. The Philadelphia Semiconductor Index tumbled about 3%. China-exposed U.S. names Wynn Resorts Ltd. and Nvidia Corp. plunged at least 4% and airlines sank. European shares fell as much as 2.4%. Chinese markets are said to resume trading after the Lunar New Year holiday on Feb. 3, but assets that track the country's largest stocks took a nosedive. The iShares MSCI China ETF and Invesco China Technology ETF dropped at least 4%. China-based Alibaba Group Holding Ltd. and Yum China Holding Inc. also slumped. The offshore yuan slid toward the lowest this year. The flight to safety, which comes ahead of this week's Federal Reserve meeting, saw volumes in Treasury futures jump to double their regular levels in Asia. The yield on 10-year U.S. bonds dropped to the lowest since October. Similar-maturity German securities extended their advance to the longest in almost six months. The Swiss franc, the Japanese yen and gold paced gains in haven assets. Oil slipped to a more than three-month low.
Steve Brown, Senior Corporate Trader | Stevebrown@vbce.ca
The CAD was relatively unphased by falling oil prices and risk aversion from the coronavirus reports early in the week. USDCAD climbed from 1.3042 up to 1.3094 before falling to 1.3036 ahead of Wednesday's Bank of Canada interest rate decision. The surprisingly dovish tone within the Bank of Canada policy statement forced the CAD lower across the board. USDCAD climbed to a 1 month high of 1.3172 before a broad recovery Thursday and Friday led the pairing back down to 1.3118. The BOC press conference was less dovish than the BOC statement implied. Also, Canadian retail sales data was not as bad as initially feared and showed a marked improvement from October. USDCAD finished the week near 1.3140/50 as equity markets and oil prices soured during Friday's North American session. Overall, the CAD, EUR, and AUD were the worst performing currencies this week. The EURO actually gained to a 3 week high just after the European Central Bank interest rate announcement on Thursday only to fall back towards 3 year lows. The deposit rate in the Eurozone remains at -0.50% and there was no indication on a move back towards positive interest rates. The coronavirus is threatening to dent China's economic growth this quarter and the AUD has suffered due to its close economic ties. The AUD initially gained on a strong employment report but quickly reversed course finishing the week as the worst performing currency. Risk aversion flows most evident during Friday's NA session led the JPY higher towards a 1 month high. The USD also broadly gained. The USD index (DXY) climbed to a 2 month high after having started 2020 near 6 month lows.
Yesterday, USDCAD climbed from 1.3142 up to 1.3172 before falling to 1.3122 and held near session lows during the NA afternoon session. The move effectively retraced nearly 50% of Wednesday's post Bank of Canada move higher. The CAD was the worst performing currency Wednesday but was the best performing currency on Thursday. The EURO was the worst preforming currency losing 1 cent to the CAD on dovish European Central Bank comments. Chairman Lagarde did not offer up any hint of a shift to positive interest rates. The ECB deposit rate was kept unchanged at -0.5%. The CAD was the best performing currency overnight along with the NZD as equity markets shrugged off coronavirus concerns sending USDCAD from 1.3143 down to 1.3121. Canadian retail sales data showed improvement but CAD gains were marginal. Over the past few hours, oil prices have reversed course from gains to losses as have equity markets. Risk aversion flows have buoyed the JPY and USD with both pairings near session highs. USDCAD has climbed from session lows @ 1.3118 up to session highs @ 1.3150 accordingly.
Stocks from New York to London to Shanghai slumped Thursday, as China grappled with a worsening viral outbreak that led investors to reassess the potential economic fallout world-wide. A number of Cities in China put in SEVERE travel restrictions. Markets are now preparing for potential worse news ahead.
U.S. stocks gained on speculation the repository illness that emerged from China won't be as bad as initially feared and as better than expected corporate earnings lifted optimism. The dollar edged lower and oil fell. Meanwhile Canadian markets have their eye on The Bank of Canada release today.
All three of the main U.S. gauges slid in early trading, with industrial shares among the worst performers after declines in Asia and Europe triggered by reports that the mystery respiratory virus originating in China was spreading faster than expected and over greater distances.
Major currencies are continuing to trade in a rather subdued manner today and may yet carry on later in North American trading, as we observe a long weekend in the US. Liquidity conditions are expected to stay thin and with Wall Street not offering any direction for investors to latch onto, trading sentiment remains rather indecisive to start the week. The pound has been the notable mover so far in the European morning but it isn't too big a move as the currency stays pressured ahead of the BOE meeting next week. Meanwhile, European stocks are more mixed with some slight weakness but are keeping near flat levels overall.
Yesterday, USDCAD held an uneventful 1.3030 – 1.3055 range. The pairing has been non-trending this week within a very narrow 1.3030 – 1.3080 range after having traded between 1.2958 (near 15 month lows) and 1.3105 last week. The EUR, GBP, and AUD are marginally lower today while the USD and JPY are marginally higher. U.S. second tier economic data was generally weaker than expected although there was very little reaction in the markets. USDCAD tested weekly support overnight before climbing to 1.3060 this morning. After the data releases the rate dropped to 1.3040 before climbing to 1.3068. The pairing has since moved lower to 1.3055.