Daily Morning Report

Wednesday, February 19–Jim Wyckoff’s Morning Markets Report

Asian and European shares were mixed but mostly firmer overnight. U.S. stock indexes are pointed toward higher openings when the New York day session begins. Risk aversion has receded a bit Wednesday. It appears the spread of the coronavirus illness (now officially called covid 19) to humans has slowed and that’s somewhat encouraging to the marketplace. However, the economic consequences of the outbreak are still playing out. What traders, investors, analysts and other market watchers are discovering is that the global supply chain sees many of its links in China, and with much of China still in quarantine, many global businesses—especially manufacturers–are suffering and may continue to do so for a while. The uncertainty regarding when the global supply chain will return to normal is likely to continue to squelch trader and investor risk appetite for at least the near term.

Gold prices have added to Tuesday’s solid gains and are at a six-week high. U.S. Treasuries are also in rally mode this week, on safe-haven demand.

The key outside markets today see crude oil prices higher and trading around $52.75 a barrel. Meantime, the U.S. dollar index is slightly up and hit another multi-month high in early U.S. trading. The greenback bulls have flexed their muscles lately, partly on safe-haven demand amid the heightened global uncertainty.

U.S. economic data due for release Wednesday includes the weekly MBA mortgage applications survey, the Goldman Sachs and Johnson Redbook weekly retail sales reports, the consumer price index, the producer price index, new residential construction, and FOMC minutes. Several Federal Reserve officials also are slated to give speeches today.

–Jim

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The safe-haven gold market has been supported recently by the concern and anxiety caused in the marketplace by the coronavirus outbreak. Prices remain in choppy uptrend on the daily bar chart, suggesting the path of least resistance for prices will remain sideways to higher in the near term. Bulls remain in firm near-term technical control. Stay tuned!–Jim

Tuesday, February 18–Jim Wyckoff’s Morning Markets Report

Asian and European shares were mostly lower overnight. U.S. stock indexes are pointed toward lower openings when the New York day session begins. Risk aversion is keener in the marketplace on this first trading day of the week for U.S. traders and investors, following the President’s Day holiday Monday.

The U.S. marketplace is downbeat following news that Apple has issued a warning saying its first-quarter sales will be lower than initially expected due to the Coronavirus outbreak that has slowed or halted the delivery of Apple’s needed supplies coming from China. The rate of daily spread of the illness has slowed to the lowest since January, reports said. Over 1,800 people have died in China from the illness. The global supply chain has been significantly impacted, as seen by the Apple sales-miss news. Reports also said over 730 million in China are still effectively quarantined, suggesting supply-chain disruptions will continue as the world’s second-largest economy is presently crippled.

In other overnight news, the closely watched German ZEW economic expectations index dropped sharply in February, to 8.7 versus 26.7 in January. The coronavirus was blamed for most of the big decline in February.

The key outside markets today see crude oil prices lower and trading around $51.25 a barrel. Meantime, the U.S. dollar index is slightly up and hit a multi-month high in early U.S. trading.

U.S. economic data due for release Tuesday includes the Empire State manufacturing survey, the NAHB housing market index and Treasury international capital data.

–Jim

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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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