Market News & Analysis
Week Ahead: Coronavirus, FOMC, BOE, and Brexit
Joe Perry January 25, 2020 4:20 AM
Wow! I’m sure not many people expected a risk off move this week due to the outbreak of a virus! With 3 Central Bank meetings (BOC turned dovish) and a return to watching the economic data after US trade deals were signed (USMCA to be signed next week), the most dominant event this week which affected the markets was the Coronavirus. So far, the virus has killed 26 people and infected more than 900. China has quarantined cities and canceled many public events during its New Years Holiday, which is expected to take a hit on Q1 GDP. There have been 2 confirmed cases so far in the US.
On the opening next week, the focus will likely continue to be the Coronavirus. If there are more confirmed cases over the weekend, especially outside of China, we could see some markets gapping on the open.
There are two major Central Bank meetings next week, which include the US Federal Reserve and the Bank of England. The Fed is expected to hold and maintain its neutral view. However, the BOE may cut given the recent onslaught on bad data (however today’s PMI data may give them pause). In addition, this will be Mark Carney’s last meeting as Governor or the Bank of England. Will he cut rates at his last meeting, a la Jean Claude-Trichet of the ECB?
The ultimate event of the week will be the ceremonial Brexit, when the UK FINALLY leaves the EU. However, there are still deals to be made negotiations to be had, which will last until the end of the year.
Earnings reports continue through next week, with highlights including AAPL, MSFT, FB, TSLA, BA, AMZN, DB, XOM, CVX, and CAT
In addition, macro data for next week are as follows:
- German Ifo
- Australian NAB Consumer Confidence
- US Durable Goods
- Australian Inflation Data
- Crude Oil Inventories
- US Fed Interest Rate Decision
- BoE Interest Rate Decision
- US GDP Growth Rate QoQ Adv Q4 -this is the first look at the 4th Quarter GDP. 2.1% is expected
- Europe GDP Growth Rate QoQ Flash Q4. –first look at 4th Quarter GBP for the Eurozone. 0.2% is expected
- US PCE Price Index – this is one of the Fed’s favorite indicators of measuring inflation, however with the FED meeting two days prior, this number may not matter as much
Chart to Watch: S&P 500 E-mini Futures
Source: Tradingview, CME, City Index
The S&P 500 stock index is a good proxy to generalize how stocks are doing as a whole. On this weekly chart, price had moved higher last week and tested the top trendline of the upward sloping trend. In addition, it tested the 161.8% Fibonacci Retracement level from the highs in September 2018 to the lows of December 2018 near 3336.50. The 161.8% level is known at the “Golden Fib” level and should be closely monitored. Also, note that the RSI is (and has been) in overbought territory. The RSI turned lower this week, once it touched 80 (extreme overbought) as the market pulled back into the channel. On a daily chart, the RSI and price were actually diverging until today (not shown). Price can trade lower to near 3225, which is horizontal support and the bottom trendline before doing any technical damage.
This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.
GAIN Capital Singapore Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the GAIN Capital group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), GAIN Capital Singapore Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact GAIN Capital Singapore Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.
In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither GAIN Capital Singapore Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.
GAIN Capital Singapore Pte. Ltd. is not under any obligation to update this report.
Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.
Cryptocurrencies are not legal tender currency and trading of derivatives on Cryptocurrencies are currently not covered under any regulatory regime in Singapore. Consequently, investors should be aware they do not have protection under the Securities and Futures Act (Cap. 289). Please ensure that you are fully aware of the risks.