Healthy data vs virus fears

Relatively robust data in the markets overshadow alarming news about coronavirus spreading and increasing number of its victims. Reports of the largest US companies continue to pull up the US indexes. Overnight, Amazon has joined the reliable earnings reports from Apple, Microsoft, and Tesla. Company shares soared by 10% after the release, increasing the company’s capitalization by about $100 billion. If there are no shocks before the start of trading in the US, the company will be the 4th IT giant, whose capitalization exceeds $1 trillion.

Strong reports of large US companies helped US indices to break away from the general market dynamics, absorbing fears of coronavirus influence on the Asian region. In this context, it becomes essential to assess the state of China before the virus outbreak.

Fresh PMI estimates showed that the situation in the industry is close to stagnation in January and that there is a surge of activity in the service sector. Manufacturing PMI declined from 50.2 to 50.0, while Services PMI rose from 53.5 to 54.1.

Data from Japan mostly exceeded expectations, supporting speculation that the lowest point of economic growth is behind us. However, as for Japan, it will be an increase from a low base. The manufacturing sector added 1.3% in December but contracted by 3.0% YoY. Data better than expected, but it is hardly a reason to celebrate.

The first estimate of the US GDP in the fourth quarter was in line with expectations, showing an annual growth of 2.1%, the same as in the quarter before and a slightly above 2Q19. The US economy as a whole, in contrast to the stock market, is not yet in a hurry to respond to the Fed’s rate cuts and asset purchases.

In general, an essential change in the markets is the fact that healthy data attracts purchases to risk assets. Asian indexes are trying to find a supporting point, although, mostly, unsuccessful. A sure victory of optimists so far can only be seen in keeping USDCNH below 7.0. The pair faced sale-off after the jump above. The same we can say about Crude Oil and US. They start the day in a small decline but show an increase over the last 24 hours. Gold, on the contrary, faced selloff when trying to exceed $1580.

The FxPro Analyst Team