Daily Morning Report

Friday, February 14–Jim Wyckoff’s Morning Markets Report

Asian and European shares were narrowly mixed overnight. U.S. stock indexes are pointed toward modestly higher openings and new record highs when the New York day session begins. Traders are tentative on this last trading day of the week and as U.S. market participants head into a three-day weekend, with the President’s Day holiday on Monday.

Here is the latest on the coronavirus outbreak: About 65,000 people around the globe have been afflicted with the virus, with China’s total now above 60,000. China’s hardest-hit Hubei province saw cases rise by over 4,800 on Friday. Some global shipping rates have fallen to record lows amid the outbreak, as some ships are being turned away at ports. One report said the Capesize index, which tracks freight rates for the largest carriers of dry bulk commodities, fell into negative territory last week for the first time since its creation over 20 years ago.

The annual London Metals Exchange (LME) Week Asia 2020 seminar has been postponed and the LME Asia Dinner has been cancelled due to the outbreak.

China’s central bank said in a statement Friday the effects of the coronavirus outbreak will only be temporary. The bank encouraged foreign investors to set up businesses in China.

The U.S. government on Thursday charged the big Chinese telecommunications giant Huawei with racketeering. The ramifications of this on U.S.-China relations and/or the U.S.-China trade deal signed in January, if any, are not clear.

The U.S. Treasury sold its 30-year bonds at a record-low yield of 2.061% Thursday, beating the previous record low auction yield of 2.17% set last fall. The lowest yield the 30-year bond has ever reached in daily trading is 1.941%, set last summer.

In other overnight news, the Eurozone fourth-quarter GDP was reported up 0.1% from the third quarter and up 0.9%, year-on-year. Those numbers were very close to market expectations.

The key outside markets today see crude oil prices higher and trading around $52.00 a barrel. Meantime, the U.S. dollar index is slightly up in early U.S. trading and hit a multi-month high overnight.

U.S. economic data due for release Friday includes retail sales, import and export prices, industrial production and capacity utilization, manufacturing and trade inventories and the University of Michigan consumer sentiment survey.

–Jim

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The Nymex crude oil futures market remains in a downtrend on the daily bar chart. However, the recent low is an area where the oil market has bottomed out in recent years. A drop below the February low of $49.31 would be a bearish omen to suggest another leg down in prices in the near term. My bias: more sideways and choppy trading–barring a major meltdown in global stock markets that may be caused by the coronavirus outbreak intensifying. Stay tuned!–Jim

Thursday, February 13–Jim Wyckoff’s Morning Markets Report

Asian and European shares were mostly down overnight. U.S. stock indexes are also pointed toward lower openings when the New York day session begins. Risk aversion has returned to the global marketplace late this week, which is benefitting safe-haven assets like gold and U.S. Treasuries.

New cases of coronavirus increased markedly Thursday in China’s Hubei province. There were over 14,800 new cases were reported Thursday in contrast to around 2,000 new cases reported Wednesday. Reports said there were around 240 new deaths in the region. Chinese health officials also widened their definition used to confirm cases. More than 1,300 people have died from the epidemic and the total number of afflicted in the Hubei province stands at over 48,200. The World Health Organization warned the recent reports about the slowdown in the spread of the virus should be treated with “extreme caution.” “This outbreak could still go in any direction,” the WHO said, regarding the status of the outbreak.

China’s businesses are being seriously impacted. There are reports of impending steel shortages and other supply chain disruptions. Auto sales in China are reported down around 20%. Global crude oil demand in the first quarter of this year is forecast to hit the slowest rate of growth in 10 years amid the coronavirus outbreak, according to the International Energy Agency. The IEA said “there is already a major slowdown in oil consumption and the wider economy in China.”

The ebb and flow of this matter as it relates to the marketplace continues—shifting between the front burner and the back burner of the marketplace on any given trading day.

The key outside markets today see crude oil prices weaker and trading around $50.75 a barrel. Meantime, the U.S. dollar index is slightly down in early U.S. trading and not far below this week’s multi-month high.

U.S. economic data due for release Thursday includes the weekly jobless claims report, the consumer price index, and real earnings.

–Jim

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Wednesday, February 12–Jim Wyckoff’s Morning Markets Report

Asian and European shares were mostly higher overnight. U.S. stock indexes are also pointed toward higher openings and near record highs when the New York day session begins. Trader and investor risk appetite is upbeat around the globe at midweek. While the coronavirus outbreak continues to spread, the rate of growth of new cases is slowing. There are now over 1,100 reported dead in China and over 45,000 afflicted. Still, there are reports in Asian countries of supply chains and local commerce being significantly interrupted by the outbreak.

In other overnight news, Euro zone industrial output for December was down 2.1% from November and down 4.1%, year-on-year. Those numbers were worse than expected.

The key outside markets today see crude oil prices higher and trading around $50.70 a barrel. Meantime, the U.S. dollar index is slightly up in early U.S. trading and not far below this week’s multi-month high.

U.S. economic data due for release Wednesday includes the weekly MBA mortgage applications survey, the weekly DOE liquid energy stocks report, and the monthly Treasury budget statement. Federal Reserve Chairman Jerome Powell will testify to the Senate today after speaking to the House Tuesday.

–Jim

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The U.S. dollar index is a basket of six major world currencies weighted against the dollar. See on the daily bar chart that the USDX is in a solid uptrend and this week hit a nine-month high. The greenback is being boosted in part of safe-haven demand due to the uncertainty of the coronavirus outbreak, but also on the strength of the U.S. economy. Technicals are bullish for the USDX and there are no early chart clues that a market top is close at hand. Stay tuned!–Jim

Tuesday, February 11–Jim Wyckoff’s Morning Markets Report

Asian and European shares were mostly higher overnight. U.S. stock indexes are also pointed toward higher openings when the New York day session begins. While the coronavirus outbreak continues to spread, it is now spreading at a lower rate of growth of new cases, which has again somewhat assuaged the marketplace Tuesday. There are now over 1,000 reported dead in China and over 42,500 afflicted. On this day the marketplace reckons the spread of the illness is getting under control and that the Chinese government, working with the U.S. and other countries, will keep the outbreak from becoming a pandemic. Traders and investors have been calmed down before on this matter, only to become anxious again. Once again, traders are markets are fickle.

Focus of U.S. traders today will be on the testimony from Federal Reserve Chairman Jerome Powell to a House of Representatives financials services committee. Several other Federal Reserve officials are scheduled to give speeches Tuesday.

The key outside markets today see crude oil prices higher and trading around $50.30 a barrel. Meantime, the U.S. dollar index is slightly weaker overnight after hitting a nine-month high Monday.

U.S. economic data due for release Tuesday includes the weekly Goldman Sachs and Johnson Redbook retail sales reports, the NFIB small business index.

–Jim

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