Weekly Market Commentary
A catastrophic week on markets, ended with the car well and truly in the ditch, if not over the cliff! This week has delivered the market verdict on the dimension of this crises. It is a major global economic crises. The uncertainty and lack of measurable impacts on national and global economies, has lead to devastation on markets for the whole week, to close out February. US and global equity markets are in meltdown, crashing into correction territory, as the Dow loses 14% in a week! US 10 year bond yields collapsed to record lows, falling to 1.14%, reflecting the flight from risk assets and demand.
Speculation over Central Bank action is rife across markets, in an effort to combat the uncertainty the crises has delivered. The coronavirus has infected people and markets but the sheer scale of the impact is not yet measurable and this is what is driving the market freefall. This complete disruption to the existing supply chain, the horrendous impact on tourism and trade and the bottom line impact on corporate earnings, are all destructive in reality. The RBA is scheduled to asses the risk and decide upon action required, while a surprise intervention by the Federal Reserve could settle, or unsettle markets further?
The impact on currencies has been murky and quixotic. The safe haven status of the Yen and CHF have been confirmed, reflecting their traditional status, but the US Dollar has been slow to attract the usual flows, as bond yields have crashed. The trade exposed currencies were always going to be held hostage to this crises, as the supply chain has been destroyed and technical support levels decimated. The next major support levels for these currencies are GFC record lows!
The RBA will be in the spotlight this week, as the first major Central Bank scheduled to deliver a rate decision, which will at the very least offer intention, if not action. There is growing speculation that the Fed may make an emergency intervention, but this maybe materialise as a public statement, telegraphing future action?
Global markets remain in turmoil and the contagion has spread from a health crises to an economic one.
Weekly Market Calendar
2/3 German Retail Sales, Australia Manufacturing PMI, Australia Job Ads, Australia Commodity Prices, UK/Italy/France/German/EU Manufacturing PMI
3/3 US Manufacturing PMI, ISM Manufacturing/Employment PMI, Australia Consumer Confidence, Australia Current Account Exports/Imports, RBA, UK Construction, EU CPI, EU Employment
4/3 Australia Construction, NZ Building Permits, Australia Services/Composite PMI, Australia GDP, US Services/Composite PMI, UK/Italy/France/German/EU Services/Composite PMI, US GDP, EU Retail Sales, US Weekly Mortgage Applications, ADP Private Sector Jobs Report
5/3 US Services/Composite PMI, ISM Non-Manufacturing, Australia Trade Exports/Imports, Challenger Jobs Report, US Weekly Jobless Claims
6/3 US Durable Goods Orders, US Factory Orders, Australia Retail Sales, German Factory Orders, Non Farm Payrolls, US Employment, US Trade, China Trade Exports/Imports