EGM Weekly Market Wrap Up.

EGM Weekly Market Wrap Up.

EGM Weekly Market Wrap Up
EGM Weekly Market Wrap Up.


Commodity:

At the end of 2019, Saudi Arabia and Kuwait reached an agreement to resume oil production from the two oilfields they share in the Neutral Zone. Trial production at the Khafji and Wafra began on Sunday, as previously agreed. The two have agreed to restore the regular production of 550,000 by the end of the year. Operational differences and a worsening in bilateral relations led to the suspension of production back in 2015 noted by Oilprice. Would this have a great effect on the Oil market in the face of the fast-spreading coronavirus? As the coronavirus continues to take a toll on oil markets, competition is heating up for crude oil suppliers—all of which are vying for a piece of the dwindling oil demand in China and Japan as refineries have started to cut their run rates. Report from Julianne Geiger Revealed that thousands of flights have been cut into and out of China, and travel within certain areas of the country have also been restricted. As a result of these restrictions and on reduced industrial output, fuel demand from the oil-producing nation continues to sink. The outlook now for oil demand is not so certain for this quarter in the face of fear of the coronavirus. The major comfort to the refiners is to cut run rates. China is also cutting run rates, with many operating at even less than half capacity. The independents are in the unfortunate position of not being able to export fuels—unlike the state-held refinery giants such as Sinopec and PetroChina. IN Shandong province, independents have said that they have collectively shut in 795,000 BPD of refinery runs, according to S&P Global Platts but, But the pain extends beyond China. Japan refiners, too, are cutting run rates by between 3-4% from the last week of January to the first week of February.

 

Gold:

Last week, gold finds itself in an oscillating situation of being pushed both higher and lower by the coronavirus. The situation in China and other Asian jewelry demand have dropped sharply according to reports as buyers are absent from the market for obvious reasons.  Moreso, safe-haven demand for coins and bullion is on the rise, not just in China but in other parts of Asia and the rest of the world (including ETF demand).  Adding to the confusion, the US dollar has joined gold and US Treasuries as beneficiaries of what is dubbed the ‘fear trade.’  The result has been to keep gold in a pricing limbo. On Monday, it closed trading at $1572 and later trading at $1576 as the day come to a close.  Silver has suffered a similar fate having started the week at $17.72 and ended at $17.70.

 

Currency:

At Tokyo, The euro fell towards a three-year low versus the dollar NSE 0.30 % ahead of a highly watched German survey on Tuesday, which is expected to show a sharp slump in investor confidence and fuel growing pessimism about the outlook for Europe’s largest economy.

 

Financial markets clung to tight ranges following a US public holiday on Monday, shifting the investor focus to European news and developments in the coronavirus crisis.

 

Among Asian currencies, the Australian dollar slipped below the 67 US cent level after minutes from the central bank’s last meeting spur the prospect of policy easing while the Chinese Yuan was overweighed by worries about the impact of coronavirus on its economy.

 

Stocks:

Nasdaq hit an all-time high at the open on Wednesday on signs of slowing coronavirus infections and expectations that China would take more measures to bolster its virus-hit economy.

 

The Dow Jones Industrial Average rose 80.51 points, or 0.28%, at the open to 29,312.70.

 

The S&P 500 opened higher by 10.10 points, or 0.30%, at 3,380.39. The Nasdaq Composite gained 50.07 points, or 0.51%, to 9,782.81 at the opening bell.

 

Stocks held gains following the release of minutes from the U.S. Federal Reserve’s last policy meeting, which showed policymakers were cautiously optimistic about their ability to hold interest rates steady this year while acknowledging new risks caused by the virus outbreak as reported by Moneycontrol.com.

 

Apple Inc rose 1.4%, regaining most of the losses in the previous session after a surprise sales warning that highlighted concerns about the coronavirus’s impact on the global supply trend.

 

The S&P 500 technology sector also rose but, end up at 1.1%. It was the second-biggest percentage gainer after energy, which rose to 1.3%.

 

Oil prices overall gained 2% on the back of slowing coronavirus cases.

 

“There seemed to be several high-profile companies that were talking about coronavirus and the potential for it to impact earnings. Today, investors are perhaps looking at markets with more thoughtfulness, recognizing (there’s) policy support and some good news coming from the infection rates,” said Kristina Hooper, chief global market strategist at Invesco in New York.

 

The Dow Jones Industrial Average rose 115.84 points, or 0.4%, to 29,348.03, the S&P 500 gained 15.86 points, or 0.47%, to 3,386.15 and the Nasdaq Composite added 84.44 points, or 0.87%, to 9,817.18.

 

Also helping the technology sector was a 6.1% gain in chipmaker Nvidia Corp after Bernstein raised its shares to “outperform.”

 

Among other stocks, Garmin Ltd jumped 6.7% after the wearable fitness device maker forecast full-year revenue above analysts’ estimates.

 

Advancing issues outnumbered declining ones on the NYSE by a 1.31-to-1 ratio; on Nasdaq, a 1.54-to-1 ratio favored advancers.

 

The S&P 500 posted 77 new 52-week highs and 5 new lows; the Nasdaq Composite recorded 169 new highs and 57 new lows.

 

Volume on U.S. exchanges was 7.22 billion shares, compared to the 7.57 billion average for the full session over the last 20 trading days.

 

Fed Rates Remains Unchanged:

3 points to importantly discussed at the FOMC and the policy signals have not reviewed any new measures are taken, which also makes sense given the many Fed speeches recently. The consensus among FOMC members is that ‘the current stance of monetary policy is appropriate‘ and that the Fed wants to see how the economy reacts to the three insurance cuts last year. The Fed thinks the coronavirus is a new downside risk to the economy but so far it is monitoring the development, not reacting to it.

 

On the upcoming monetary policy review, the Fed still aims to complete the review around the middle of the year, i.e. a decision could come in the second half of the year, perhaps already in September. The FOMC members had a long discussion about how to tweak the current symmetric 2% inflation target as reported by Danske. While most participants expressed concerns’ about introducing a permanent inflation target range around 2%, as it could be misperceived as the Fed is comfortable with continued misses below 2%, the FOMC members still seem to prefer the idea of some sort of average inflation targeting. At the meeting, the FOMC members discussed the idea of a (temporary) asymmetric operational range with 2% being at or near the lower end of the range. This would signal to market participants that the Fed can tolerate inflation above 2% for some time without raising rates.

 

 

-Moses Kayode.

-Derivative Analyst, Eagle Global Markets.

 

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2 Comments to “EGM Weekly Market Wrap Up.”

Author's gravatar

Great content! Super high-quality! Keep it up! However, I am of the belief, that the coronavirus would be a notable fundamental that would continue to drive the markets in the coming week.

Author's gravatar

Thanks for the market wrap.

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