European indices end the session lower but off lowest levels

German DAX, -0.62%. France’s CAC, -0.62%. UK’s FTSE, -0.54%

The major European indices are ending the session (and the week) lower.
A look at the provisional closes are showing:
  • German DAX, -0.62%. The intra-day low extended to -1.2%
  • France’s CAC, -0.62%. The intra-day low extended to -1.1%
  • UK’s FTSE 100, -0.54%. The intra-day low extended to -0.89%
  • Spain’s Ibex, -0.46%. The intra-day low extended to -0.88%.
  • Italy’s FTSE MIB -1.34%. The intra-day low extended to -1.63%
The changes in ranges for the major stock indices in Europe and US
For the week, the these are ending in the red:
  • German DAX, -1.2%
  • France’s CAC, -0.74%
  • UK’s FTSE 100, -0.17%
  • Spain’s Ibex, -0.72%
  • Italy’s FTSE MIB, -0.49%

In other markets as London/European traders exit for the day shows:

  • S&P index -0.79%
  • NASDAQ index -1.18%
  • Dow -0.68%
Spot gold is trading up $20.06 or 1.24% at $1639.70
WTI crude oil futures are trading down $0.66 or -1.22% of $53.23

Dollar in a tricky spot after PMI readings from Europe

Can the euro and risk take heart from the arguably better readings today?


From the headlines alone, the euro can take heart in the fact that the readings today show some relative improvement – with domestic demand and services holding up – and there are also some signs of moderation in the manufacturing contraction.
Although it needs to be put into perspective, the market may not necessarily look at that considering the tendency to be short-sighted at times.
Going into the PMI releases today in Europe, risk was in a softer spot and the worry is that poor readings may compound virus fears ahead of the weekend.
The natural reaction would be such a scenario will be bad for risk and good for the dollar.
However, that did not play out. Instead, we are in a situation where the market could interpret things in two ways i.e. focus on the arguably better readings or proceed with some caution considering the details are still masking some potential issues.
The former would mean a possible short covering in the recent downside run in the euro and a short squeeze could see the dollar feel some pain ahead of the weekend.
Meanwhile, the latter could see the market sit in limbo for a bit before having to decide what may happen to risk (fear or greed) when Wall Street comes in. That means price action may be confined to levels that we are seeing now.
I would say this is the current predicament that the market is facing after the PMI readings in Europe today. In any case, don’t forget that there is also the US PMI readings later in the day so perhaps the market will be more responsive after clearing that hurdle.

Risk remains softer ahead of European trading

Virus worries weigh on the market but Chinese stocks are still rallying


Treasury yields are lower across the curve with 10-year yields back under 1.50%, slipping to its lowest levels since September last year as the market is leaning towards being more risk averse ahead of European trading today.
In turn, gold is breaking out in a strong way with price near the highs now around $1,628 with the currencies space also reflecting softer risk flows.
The aussie and kiwi are weighed lower with the franc among the better performers, despite narrower trading for the time being. USD/JPY is also seeing a bit of a pullback under 112.00 for now, so perhaps are we seeing a return to the norm for the yen?
Despite the negativity, Chinese stocks are continuing to rally as authorities prop up the equities market with more and more stimulus measures. The run just keeps going.
It’ll be interesting to see if Wall Street can turn things around later today, but with PMI readings in the European morning likely to reaffirm worries about global growth, I reckon we may be set for a more risk averse period before the weekend this time around.

Coronavirus – China’s Hubei province revises its total number of confirmed cases to 62,662

China’ s Hubei province is the epicentre of virus outbreak,

  • revises up number of new cases on Feb 20 to 631 from 411 reported earlier on Friday
  • says total number of coronavirus cases in province revised up to 62,662 vs 62,442 previously
  • says revision in coronavirus cases includes 220 cases previously unaccounted for from province’s prison system

China says the coronavirus vaccine to be submitted for clinical trials around late April

China Vice Technology Minister Xu says that the fastest a coronavirus vaccine to be submitted for clinical trials will be around late April

So, good news and bad news in that.
ps. China’s Global Times have now reported on that outbreak at a prison with 200+ cases reported.
  • Rencheng Prison
  • located in Jining City, Shandong Province
  • 207 new confirmed cases

AUD/USD on 0.65 big figure, first time in a decade

Australia is closely interlinked with China’s economy, and thus getting hit by the fallout of the outbreak

AUD/USD under 0.66 first time since 2009 with the news worsening on the coronavirus today, cases accelerating in South Korea. A freer media in South Korea reporting on cases is further cementing doubts about the veracity of the data on the virus impact out of China.
NZD taking a hit also
ps.  This from Goldman Sachs overnight:
  • “The number of ‘missing work days’ in China will be roughly equivalent to the entire US workforce taking an unplanned break for two months.”
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