The main topic on Friday and the weekend is the coronovirus from China. The American stock market has been growing for 8 weeks in a row. Growing on every news story. And even on this virus, it’s been growing for 10-15 days.
The Chinese authorities have cut off several cities with a population of 50 million people from the transport infrastructure. Most likely, the Asian markets will be the first to collapse very sharply, and in their wake also the markets of Western countries. We will be glad if that does not happen. But you have to be very careful.
Chart des Tages S&P500
Epidemics always start very slowly, for 2 reasons: the presence of an incubation period + a small number of affected patients. At some point, both indicators reach a critical mass, and then everything turns into an avalanche. According to virologists, 1 affected person infects 4-5 people. This means that if there is no dramatic improvement in the near future (e.g. if the virus mutates and becomes less contagious), the number of patients will reach hundreds of thousands of people for a week. Please note that these are really sick people and not the number announced by the Chinese authorities.
As always with any Asian disaster, AUD/JPY is becoming the most active pair. If the stock markets continue to fall, it will likely be the best pair to short. The Aussie is falling against the US dollar, while the Japanese yen is rising against the US dollar.
On Friday, the BRENT oil broke through an important psychological mark of 60 dollars per 1 barrel. It is not yet visible what can stop the fall. The demand for black gold will fall next month due to lower consumption in China and fewer flights. Tourists are massively turning in previously purchased tours. And China has banned organized tourist groups from leaving their country.
Against this negative background, yellow metal feels great. The exit of investors from stocks raises the question “what to do with the money”? Gold is the first candidate for the accumulation of free cash flow. Already in the first 3 days of the new week the level of $ 1600 an ounce can be tested again.
What awaits us today?
Chinese New Year
10.00 IFO Germany Economic expectations indicator for January
16.00 New home sales in the United States for December
16.30 Business activity index of the US Reserve Bank of Dallas for January
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