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Market Recap
Market sentiment has taken a hit in early Friday trade as fears over rising COVID-19 infections have caused financial markets to move back into risk-off trading mode. US President Biden caused the market mood to sour after he said that COVID-19 deaths could rise to 500,000 next month.
To make matters worse the Director of the US Centres for Disease Control and Prevention (CDC) raised concern about the overall availability of vaccines made by pharmacies across the United States.
Sticking with the COVID-19 narrative, oil prices have fallen this morning after China increased restrictions on travel during the Lunar New Year holiday period. WTI oil has taken a hit on fears of decreased demand for oil in the world’s second-largest economy.
The Biden administration also made an announcement that they are going to suspend new oil and gas leasing on public land and water for two months. This was seen as the Democrat party making good on its commitment to more emphasis on climate change policy.
Hong Kong announced that they will shutting down Kowloon for three days due to COVID-19 infections increasing. The PBOC also set the USD/CNY currency at the mid-rate today at 6.4617.
The ASX 200 came under pressures after Australian retail sales came in much weaker-than-expected earlier today. December Australian retail sales number plunged to -4.1 percent against expectations of +7.1 percent the previous month.
Commodity-related currencies have also taken a hit over demands fears and risk-off fears. The Australian dollar, New Zealand dollar, Canadian dollar, and South African rand are all taking a hit this morning.
Due to the risk-off mood Asian stocks have taken a hit this morning, with most major indices closing the session in negative territory. US futures are also called to open-up heavily in the red.
Following yesterday’s ECB meeting the euro is riding high this morning. The ECB failed to jawbone the euro currency lower and sounded more hawkish towards the euro economy than many market participants expected.
Bitcoin has recovered back above the $30,000 level after briefly dropping below the $29,000 level this morning. Cryptos have started to sell-off over recent days, following bearish comments surrounding Bitcoin and cryptocurrencies from US Treasury Secretary Janet Yellen.
Day Ahead
The European and US sessions are going to be heavily focused on PMI manufacturing data. The eurozone PMI is expected to come in better than last month, leaving plenty of scope for disappointment, and potential reason to sell the euro if the data prints a big miss.
Sterling is notably weaker today and has fallen back under the 1.3700 level. The UK manufacturing PMI is expected to come in at 57.5, which would mark a multi-month high.
The US PMI manufacturing reading is set to be a big market mover, especially the prices paid component inside the PMI report. The release should set the tone for the US dollar index, stocks, and bonds for the next few days.
US President Joe Biden is set to speak later today in response to the economic crisis. With Biden already making policy decisions at an accelerated pace, the market mood is expected to be tense until the speech is out-the way.
