The spread of the Coronavirus will continue for days/weeks to come. The death toll has gone above a hundred in China and the economic impact on the world’s second largest economy is difficult to predict right now. It is interesting though that the World Health Organisation (the WHO) continues to refrain from declaring the Coronavirus as a global health emergency. Financial markets are often quick to price in events, and there are signs of stability starting to creep back in this morning. The US 10 year Treasury yield held up above 1.600% yesterday and has ticked slightly higher this morning. The flow into safe haven assets such as the yen and gold has also threatened to dry up. Equity indices which felt significant selling pressure yesterday are seeing futures edging back higher today. However, there is a caveat in that markets looked to stabilise early last week before a significant bout of selling kicked in. This suggests caution is still required. The Federal Reserve kick off its two day FOMC meeting today and this could also begin to play into the consolidation.
Wall Street closed sharply lower yesterday with the S&P 500 -1.5% at 3243. However, with US futures rebounding by +0.6% today this is helping to steady the selling early today. The Nikkei was -0.6% lower early today whilst in Europe the outlook is looking brighter with FTSE futures +0.4% and DAX futures +0.5% higher. In forex there is something of a mixed mood. Selling through AUD and NZD is far less pronounced whilst CAD is up and the safe haven JPY is giving up some of its gains. In commodities, in keeping with the more encouraging risk environment, gold is back lower by -$4, whilst oil has rebounded from early losses and is now around flat on the day.
There is a big US focus to the economic calendar today. We start with US Durable Goods Orders at 1330GMT which are expected to see the adjus