Daily Morning Report

Tuesday, February 4–Jim Wyckoff’s Morning Markets Report

Asian stock markets rebounded overnight after Monday’s sell-off. European stock markets were also higher and U.S. stock indexes are pointed toward sharply higher openings when the New York day session begins. So far this week trader and investor risk appetites are keener and the marketplace appears to be moving beyond the coronavirus outbreak that continues to spread. Latest counts show over 20,000 Chinese citizens afflicted with over 425 dead, with air travel to China being significantly curtailed and global and domestic business there disrupted.

China’s central bank this week has injected large amounts of money into its financial system to help out domestic businesses that are being hurt by the coronavirus outbreak. This move has helped to assuage Asian investors.

In other overnight news, the Euro zone producer price index in December was reported unchanged from November and down 0.7%, year-on-year. Those numbers were in line with market expectations.

The markets took in stride the highly anticipated Iowa presidential caucuses that have yet to declare a Democratic winner, due to technological issues with the vote count.

The key outside markets today see crude oil prices firmer and trading around $50.75 a barrel. Meantime, the U.S. dollar index is slightly higher on some follow-through strength after good gains posted Monday.

U.S. economic data due for release Tuesday includes the weekly Goldman Sachs and Johnson Redbook retail sales reports, the ISM New York report on business, the IBD/TIPP economic optimism index, and manufacturers’ shipments and inventories.

–Jim

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The crude oil market has been pounded lower by the coronavirus outbreak. Has the outbreak nearly run its course, from an overall markets-impact perspective? While it’s too early to tell for sure, it appears the oil market has, or is close to, bottoming out. See on the daily bar chart for March Nymex crude oil futures the steep price downdraft that is now overdone on the downside. The Relative Strength Index at the bottom of the chart shows the lowest (oversold) reading since last summer, at which time oil prices also put in a near-term low. And if oil prices have indeed bottomed out, other raw commodity markets that have been hit by the coronavirus outbreak may also be doing the same. Stay tuned!–Jim

Monday, February 3–Jim Wyckoff’s Morning Markets Report

Asian stock markets were lower overnight, led by sharp losses in mainland China stocks as those markets reopened for the first time in over a week, due to the Lunar New Year holiday last week. The Shanghai stock index lost nearly 8% on the day—the biggest drop in 4.5 years. European stock markets were mostly up and U.S. stock indexes are pointed toward higher openings when the New York day session begins.

The coronavirus outbreak in China that has spread to other parts of the world remains in focus early this week. Latest counts show 17,500 Chinese citizens afflicted and over 350 dead, with air travel to China being significantly curtailed and global and domestic business there disrupted. It’s been an up-and-down daily trading affair for markets the past two weeks, regarding the coronavirus outbreak. Judging from the European and U.S. stock markets’ gains Monday, at least on this day the present situation appears to be factored into market prices.

In other Asian news, Hong Kong’s economy contracted by 1.2% in 2019, the first negative growth rate in over 10 years. Civil unrest and a global trade slowdown hurt that city’s economy.

In the Euro zone, the January manufacturing purchasing managers’ index (PMI) came in at 47.9, which was slightly better than expectations, but still a reading below 50.0 that suggests a contraction in the sector.

The U.K. has officially exited from the European Union as of last Friday. The British pound saw some pressure as the U.K. and Euro zone officials begin transition talks.

The key outside markets today see crude oil prices modestly up and trading around $51.80 a barrel. Reports overnight said Saudi Arabia is mulling a “drastic” temporary oil-production cut due to the coronavirus outbreak. OPEC ministerial officials may meet this week to discuss the matter. Meantime, the U.S. dollar index is higher on a corrective bounce from solid losses seen last Friday.

U.S. economic data due for release Monday includes the U.S. manufacturing purchasing managers’ index (PMI), the ISM manufacturing report on business, construction spending, domestic auto industry sales and the global manufacturing PMI.

–Jim

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Friday, January 31–Jim Wyckoff’s Morning Markets Report

This last trading day of the week and of the month finds Asian and European stock markets mostly lower. Mainland China markets remain closed for the Lunar New Year holiday. U.S. stock indexes are pointed toward lower openings when the New York day session begins.

The coronavirus outbreak is back on the front burner of the global market place Friday. Risk aversion is in order on this day as the outbreak has around 10,000 Chinese afflicted and over 210 have died. The World Health Organization is now calling the outbreak an emergency. Add the U.K. to the growing list of countries that have reported the many are calling the “Wuhan virus.” The impact on global economic growth is in question, but nobody has a clear answer at present, as the situation continues to play out.

It’s been an up-and-down trading affair the past week regarding the coronavirus outbreak. One day the marketplace deems the outbreak as overblown and then next day it deems the situation as serious and escalating. The uncertainty of the matter has hit the raw commodity sector hard, led by crude oil prices dropping over $12.00 a barrel from the January high. Safe-haven gold prices have benefitted from the keener anxiety, but it’s also been a choppy trading affair.

In other dour economic news, the European Union collective economy grew a paltry 1.2% in 2019, it was reported Friday, which is the slowest pace in six years. A slumping EU auto sector was partly to blame.

The key outside markets today see crude oil prices modestly up and trading around $52.50 a barrel. Meantime, the U.S. dollar index is slightly higher. The USDX hit a two-month high earlier this week.

U.S. economic data due for release Friday includes personal income and outlays, the employment cost index, the ISM Chicago business survey and the University of Michigan consumer sentiment survey.

–Jim

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Thursday, January 30–Jim Wyckoff’s Morning Markets Report

Asian and European stock markets were mostly lower overnight. Mainland China markets remain closed for the Lunar New Year holiday. U.S. stock indexes are pointed toward solidly lower openings when the New York day session begins.

After Tuesday and Wednesday shrugging off the coronavirus outbreak that is still not at all contained and apparently escalating, the marketplace on Thursday is on edge and risk averse regarding the matter. The latest reports say over 7,700 Chinese are afflicted and over 170 have died. Global businesses located in China are closing their doors there and worldwide flights to China are being cancelled. The coronavirus outbreak is now being deemed more expansive than the SARS outbreak that occurred in Asia over 15 years ago.

U.S. traders are wondering if the seriousness of the coronavirus situation in China will give China a legal “out” on its recent signed trade-deal pledge to buy significantly more U.S. agricultural products in the next couple years.

At his press conference after the FOMC meeting conclusion Wednesday afternoon, Fed Chairman Jerome Powell said the coronavirus outbreak could have consequences for global economic growth and said the Fed is monitoring the situation closely. That comment along with other less upbeat remarks on the U.S. economy from Powell, including saying U.S. business investment and U.S. exports are weak, boosted the gold and Treasury markets and pushed U.S. stock indexes off their daily highs. Crude oil prices also sunk at the same time. There is now talk in the marketplace that the Fed will be forced to lower U.S. interest rates later this year.

The FOMC at this week’s meeting held U.S. interest rates steady during its first policy meeting of the year and of the new decade, as expected. The benchmark federal funds rate remains in a range between 1.5% to 1.75%, where it has been for the past few months. The FOMC statement said the U.S. economy and labor market are growing moderately amid inflation that is non-problematic. Annual U.S. inflation remains below the 2% level that the Fed would like to see.

The key outside markets today see crude oil prices lower and trading around $52.25 a barrel. Meantime, the U.S. dollar index is slightly higher and is near this week’s two-month high.

U.S. economic data due for release Thursday includes the weekly jobless claims report, the advance estimate of fourth-quarter GDP, which is expected to come in at up 2.1% on an annual basis.

–Jim

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Wednesday, January 29–Jim Wyckoff’s Morning Markets Report

Asian and European stock markets were mostly firmer overnight. Mainland China markets remain closed for the Lunar New Year holiday. Hong Kong’s stock market did open today, following the holiday, and closed lower. U.S. stock indexes are pointed toward firmer openings when the New York day session begins, following solid gains Tuesday.

While the coronavirus outbreak is still not at all contained, the marketplace at this point is deeming the event as fully factored into market prices. That perception could change. Traders and investors are turning their attention to other matters.

This week’s meeting of the Federal Reserve’s Open Market Committee (FOMC) that began Tuesday morning and ends Wednesday afternoon with a statement is expected to see no change in U.S. monetary policy. Fed watchers will be interested to see if the FOMC statement or Fed Chairman Powell at his press conference will address very short-term credit funding for banks. That rate in past months became unstable, causing overnight lending rates to briefly spike.

The key outside markets today see crude oil prices higher and trading around $54.00 a barrel. Meantime, the U.S. dollar index is slightly higher and is near this week’s two-month high.

Other U.S. economic data due for release Wednesday includes the weekly MBA mortgage applications survey, advance economic indicators, pending home sales, and the weekly DOE liquid energy stocks report.

–Jim

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