Breaking News
0
有香港版
您更倾向于浏览Investing.com的中文版吗?

Take Five: The virus data fog

EconomyFeb 28, 2020 11:28AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

LONDON (Reuters) - 1/DATA DIAGNOSIS

We'll soon get the first proper glimpse at the economic damage the coronavirus is inflicting. China's official Purchasing Managers' Index is due on Saturday, and is expected to show the sharpest manufacturing contraction since the 2008 global financial crisis.

Then comes Korean trade data on Sunday, followed by regional PMIs on Monday, Malaysia's January export stats on Tuesday and those from Australia on Wednesday. Just as infection figures have guided guesswork around the scale of human loss and the length of the disruption, the data will help with the first real estimation of its depth.

What it won't show are the multiplier effects of chaos and fear in a globalized world. What about the supply chain disruptions, such as the weeks-long idling of Chinese plants belonging to the world's biggest ball bearings maker?

On top of that, collapsing confidence, layoffs or even reduced working hours - hitting both output and demand - and a credit crunch are adding to the woes and raising the prospect of a more profound shock as markets scramble to find out how bad the damage is in the data fog.

(Graphic: China GDP contributions - https://fingfx.thomsonreuters.com/gfx/mkt/12/8043/7974/Pasted%20Image.jpg)

2/GET OFF THAT BRAKE

As the virus grips markets and recession risks flash amber, the focus turns to damage limitation plans. So any signals from powerhouse Germany that it is willing to suspend its debt brake - a strict rule on the amount of debt it can raise - and increase spending will be watched closely.

Europe's biggest economy has long resisted calls to take advantage of record-low borrowing costs to support an economy close to recession. Chancellor Angela Merkel's conservatives said on Thursday they won't support a proposal by center-left Finance Minister Olaf Scholz to ease the debt limit and help indebted municipalities to hike spending.

But now Germany faces pressure to do more, especially given the European Central Bank is near the limits of what it can achieve.

With money markets pricing in an ECB rate cut as early as June, German savers' exasperation over negative rates will grow. They, of course, could well join the clamor for more German spending - one thing economists say may help stem the tide of negative rates.

(Graphic: Italian, German weekly bond moves - https://fingfx.thomsonreuters.com/gfx/mkt/13/2644/2609/deit2802.png)

3/OPEC FACES OIL SLIP

With crude oil prices down 25% since the start of 2020, there is no shortage of topics to discuss when members of the Organization of the Petroleum Exporting Countries and its allies including Russia - known as OPEC+ - meet in Vienna on Thursday and Friday.

The group has already slashed oil output by 1.7 million bpd under a deal that runs to the end of March. In an initial response to counter the hit of the virus, an OPEC+ committee has recommended deepening output cuts by 600,000 bpd. But that figure is now seen as not enough by some in the group.

Saudi Arabia, the biggest OPEC producer, and some other members are considering an output cut of 1 million barrels per day for the second quarter of 2020, according to sources.

(Graphic: Oil versus Gold - https://fingfx.thomsonreuters.com/gfx/buzzifr/15/7959/7959/Pasted%20Image.jpg)

4/ AFTER THE DIVORCE

Newly divorced Britain and the European Union kick off negotiations for a trade deal on Monday, sounding the starting gun on a process due to be wrapped up by Dec. 31.

The mood music in the run-up to the talks suggests a rocky ride as Brussels and London try to hammer out agreements on everything from fishing to transport to replace more than 40 years of closely aligned relations following Britain's exit from the EU on Jan. 31.

The British government has threatened to walk away from the talks if "good progress" was not made by June. France's European Affairs Minister said the EU would not accept "artificial deadlines" in the talks, urging London to be led by reason in the negotiations.

With coronavirus panic dominating world markets, the launch of the talks may seem somewhat of a sideshow. But expect the start of the negotiations to set the tone for the 10 months of talks, which if inconclusive come end-2020, could see Britain and the EU face a "hard Brexit". Sterling shed 2.1% of its value versus the euro (EURGBP=D3) this week, partly as the rhetoric from both sides hardened.

(Graphic: Sterling vs euro - https://fingfx.thomsonreuters.com/gfx/mkt/13/2657/2622/sterling%20euro.png)

5/VOTING VOLATILITY?

The race for the Democratic U.S. presidential nomination heats up in the days to come and the results could divert some attention from the spread of the coronavirus. South Carolina's primary election provides the appetizer on Saturday before 14 states go to the polls on Super Tuesday - the largest single-day delegate haul in the nomination fight.

Investors will be looking to see whether progressive Senator Bernie Sanders consolidates his lead or if moderates such as former Vice President Joe Biden or former New York Mayor Michael Bloomberg can make inroads. While investors have been more consumed by the coronavirus developments, election-related headlines have jostled some parts of the market.

Shares of U.S. health insurers such as UnitedHealth Group (N:UNH), for example, have in recent months been vulnerable to the rising prospects of Sanders and fellow candidate Elizabeth Warren.

(Graphic: Sanders nomination odds vs health insurer shares - https://fingfx.thomsonreuters.com/gfx/editorcharts/USA-STOCKS/0H001R8DKC2J/eikon.png)

Take Five: The virus data fog
 

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email
We have a special offer for you