We hope that our subscribers benefit by viewing the mailing list every day. Our task is to highlight the most important thing that requires close attention from the huge amount of information that falls on you from all sides.
Last Monday, we first drew your attention to the huge market risks associated with the coronovirus. Only 7 days ago, almost no one paid attention to the problem. But how quickly everything has changed! The number of people who got sick increased 10 times in a week. And after the markets closed on Friday, Donald Trump signed a decree to introduce an emergency regime in the United States.
Chart of the day S&P500
The name of the document must not mislead anyone. Now we are just talking about denying entry to the country to citizens who have visited China during the last 2 weeks. Or quarantining them if they have American citizenship.
It’s still nothing yet, but it’s only been a week. But the markets are beginning to look at the problem adequately.
On Friday, the US dollar fell sharply against all major world currencies. You don’t have to look for a logical reason for that. The market is brutal and constantly looking for ways to deceive us by doing the most illogical things.
For those who trade recently, we recommend looking at monthly charts for autumn 2008. During the last crisis, the American dollar rose sharply against the euro, the pound and even the Swiss franc.
Now the important difference is that the dollar has a large positive swap against all major currencies, which means that when the crisis expands, more and more money will flow into it.
After Thursday’s bounce, Friday was a “bloody day” for all stock markets. Investors were selling assets in panic. And by the time the markets were closed, the process had only accelerated. For many people it was understood that it was simply terrible to leave for the weekend with a large package of shares on hand. And, of course, someone had an insider on Donald Trump’s order to introduce an emergency regime.
Everything we have written about oil over the last week is becoming even more relevant. In fundamental and technical terms, its prospects are terrible. If the situation in China spreads around the world, oil will collapse to $15-20 a barrel. We hope that it will not go so far and that the spread of the virus will decline. However, the downside potential is huge, so it is worth thinking 100 times before trying to catch the “falling knives.
What’s waiting for us today?
02.45 Caixin PMI Index in China January
09.55 Business activity index in the German manufacturing sector for January
10.30 UK Manufacturing Index January
16.00 55 ISM Manufacturing Index for January
Important Notes on This Publication:
The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.