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Equities continue on record run, while other risk assets continue to lag

Published February 7, 2020

Stock markets across the globe have barely taken a breather on their runs higher, this is in the face of pitiful German new orders data, no confirmation of an effective treatment, or containment, for the coronavirus and warnings from the ECB that it hasn’t got any powder left in the keg.

German factory orders overnight printed at -2.1% for December (this was against a market forecast of 0.6%), capital goods orders also fell as foreign demand for consumer goods plunged, remember this is the Euro Zone’s largest economy. Remaining in the EZ and ECB President Lagarde granted overnight that there are real limits to what the ECB could do to stimulate the economy further if it was required.

Equity moves seemed to be somewhat on the back of news that China would be lowering tariffs on $US75 billion worth of US imports. The move comes as China attempts to ease pressures on growth and potential price inflation in its economy in response to the coronavirus and that they may not have the logistics (with the coronavirus outbreak) to take delivery of the US$200 billion they agreed to with the phase 1 agreement, watch that space.

Growth and risk sensitive assets (AUD case in point) have yet to demonstrate the same level of relief and optimism regarding the global growth outlook as equities have so far. In fact contrast to equities trading at all-time highs, we’re seeing gold posting gains as demand for safe haven assets remains strong…

Yesterday’s release of Australian Retail Sales data topped the economic calendar and largely disappointed. Retail Sales were shown to have contracted by 0.5% last month, market were expecting a mere -0.2%. Retail consumption was shown to have been weakest in department stores, clothing and apparel. Market participants must have been anticipating a lower number as there was barely a reaction to the lower print.

Traders will be focused on two major events today/tonight, the RBA’s release of its quarterly monetary policy statement, and US Non-Farm Payrolls figures announced during their session.

 

 

Adam Nikitins and Stewart McCallum were appointed Joint and Several Voluntary Administrators of EncoreFX (Australia) Pty Ltd on 30 March 2020.

Rees Logan, Adam Nikitins and Stewart McCallum were appointed Joint and Several Voluntary Administrators of EncoreFX (NZ) Limited on 30 March 2020.

Any queries regarding the Administrations should be directed to encorefx@au.ey.com.