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Research Market strategy
by Swissquote Analysts
Daily Market Brief

Nasdaq hits record, gold, yen retreat as WTI struggles near $50/barrel. PMI services in focus.

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Nasdaq hits record, gold, yen retreat as WTI struggles near $50/barrel. PMI services in focus.

By Ipek Ozkardeskaya

US equities rallied on Tuesday. The S&P500 (+1.44%) and the Dow (+1.50%) recovered as Nasdaq surged 2% to a fresh all-time high. The correction of the coronavirus sell-off and the rush towards technology stocks were the major catalysts. Disney’s results were better than thought thanks to the striking launch of Disney+ in the fourth quarter. Tesla surged another 13.73%, eBay jumped 8.78% after Intercontinental Exchange made a takeover offer that could value the company to $30 billion and more, Apple and Microsoft rose 3.30%, even Facebook which recently fell from grace advanced 2.76%.

Snap tumbled 15% in the after trading, however, after its revenue and first quarter forecast missed estimates. Other than Snap, it was a fine day for the US equities.

Asian stocks followed up on the US session gains. All markets traded in the green except Malaysia. Shanghai’s Composite advanced 1.65% despite news that the coronavirus deaths topped 500. Nikkei gained 1.43%, ASX 200 +0.39% and Kospi +0.60%.

But futures for European stock indices remained on the backfoot after a solid Tuesday session. FTSE and DAX futures edged lower hinting that the European equity markets could retrace a part of yesterday’s gains at the open.

WTI crude is sputtering near the $50 a barrel. What keeps the price from tumbling further is certainly the expectation that the OPEC+ could lower its production by a million barrels per day to readjust its offer to the sharp decline in oil demand caused by the coronavirus. Given the mounting downside pressure on oil and gas prices, anything less than that would send the price of a barrel below the $50 handle.

On the data front, the Caixin China services PMI fell to 51.8 in January versus 52.0 expected by analysts and 52.5 printed a month earlier. Provided that more than 50 million people were quarantined last month, rail and road travels on major axed halted, most businesses closed their doors and haven’t opened just yet, a minor fall in expansion is rather encouraging. Or the number doesn’t tell the truth.

In the FX markets, the USDJPY surged above 109.50 as safe haven capital quit the yen. Gold shortly traded below $1550 per oz then rebounded. The euro and the pound remained ranged. The EURUSD steadied near its 200-hoy moving average (1.1035) before the final January services PMI figures, as Cable traded a touch above the 1.30 handle.

Yesterday, the UK construction PMI bettered the already solid expectations in January. Today, the services PMI should confirm a rebound in activity posterior to the December snap election as well. So far, we know that the business surveys reacted well to fading political stress and waning no-deal Brexit expectations. How much of this optimism would translate into the headline data such as growth and inflation is what will really matter to the pound. In this respect, the next couple of data points may see limited market reaction if they refer to the pre-election period. Among those, the fourth quarter growth and December production data due next Tuesday. Only the following week, the January inflation data (due February 19) should have the means to move the pound in a meaningful manner. Until then, the speculation that things are improving should put a floor under the pound, weakened by worries that bilateral Brexit negotiations won’t be a piece of cake.

 
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