Reports

Equities Rebound on WHO’s Report, Wall Street to Scale Record Level on Intel Gains

Cues from the international market, WTO declaration, and Chip sector gains to push Wall Street to record levels. 

WHO's Report
WHO’s Report

Summary: Asian markets saw mixed activity following the recent report from the World Health Organization. Fear surrounding the Chinese virus outbreak, which clawed across the global market for the majority of the week, has finally eased up as the WHO declared that the new virus is not an international emergency. While Chinese markets continue to decline on impact from the ongoing virus outbreak, the rest of the world got a reprieve.

Following positive cues from the Asian market, European markets also opened on positive note supported by broad-based risk appetite. The gains were further boosted as major indices, and key equities skyrocketed on positive German PMI data-led relief rally. In the forex market, major currencies continue to see mixed activity on local data and headlines driven momentum. 

Precious Metals: Gold, Silver, and other precious metals declined sharply in the global market as demand for safe have assets eased following WHO’s update regarding the virus outbreak in China. Further, firm USD in the global market, which meant a higher exchange rate for traders who hold currencies other than US greenback, also affected the demand resulting in today’s sharp decline. 

Crude Oil: Crude oil price recovered earlier in the day on the decline in UK EIA weekly stockpile data released yesterday. However, the price soon lost its gains and continued to decline in the global market as the scenario of travel ban and decline in Airline transportation to China – the world’s largest importer of crude oil remained unchanged while supply to demand ratio remains in favor of crude oil bears.

AUD/USD: The pair continues to trade with dovish bias as AUD suffers a multi-pronged attack from bearish cues. Australian bushfires, travel ban during tourism season on virus outbreak issue, dovish cues from China and firm USD adds strong pressure to AUD offsetting any short term gains made from positive macro data-led short term gains resulting in a steady price decline. 

On The Lookout: As January moves towards a close, the Brexit deadline moves very close, shifting the attention of global traders to the European market. On a separate note, in their bid to offset the brute force method handled by the USA to paralyze WTO appeals, and in order to shift trade negotiations in their favor, EU, China & other major WTO members have banded together to form a temporary body to settle trade-related disputes.

Given Washington’s mechanism to block all WTO appellate body appointments for the next two years, the temporary body will be handling any trade-related disputes and act as temporary Supreme Court for international trade-related disputes in-order to ensure smooth trade deal negotiations. How the USA counters this move or reacts to this move by Europe ahead of upcoming trade negotiations will dictate activity in the global market the year ahead.

On the economic calendar release front, the US market will see the release of Preliminary Manufacturing, Services, and Markit Composite PMI’s while the Canadian calendar sees the release of Core Retail Sales data. 

Trading Perspective: US futures in the international market saw positive activity ahead of Wall Street opening following WHO’s declaration and upbeat risk sentiment in the global market. This, along with positive earnings data forecast from Intel and Broadcom, suggests Wall Street indices are set to scale record levels in the last trading session of the week. 

EUR/USD: The pair is trading with clear bearish bias today and failed to recover despite positive German PMI data. Firm USD in the global market also adds pressure to EURO bulls pushing the pair to see a sharp decline. Traders now await US Preliminary PMI for short term profit opportunities. 

GBP/USD: The pair is trading with dovish bias and failed to capitalize on positive UK PMI’s as BOE rate cut speculations and caution ahead of looming Brexit deadline keep GBP under pressure. Firm USD also added to GBP’s woes as traders shift focus to US Preliminary PMI for short term profit opportunities.

USD/CAD: The pair is trading positive in the global market as US Greenback remains strong in the global market while Canadian Loonie declined on pressure from steep loss incurred by crude oil price in the global market. Traders now await Canadian Retail Sales data & US Prelim PMI’s for short term profit opportunity. 

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