Optimism Continues Pushing Markets Higher
European stock markets were trading broadly higher as reports indicated that the spread of the coronavirus in Asia may be dwindling. Though the death toll peaked on Monday, the number of new infections declined, which traders took as a sign that the worst of the virus is behind us. The FTSE spiked 0.86 percent as of 11:25 a.m. GMT, while the DAX was up 0.8 percent. France’s CAC gained 0.47 percent, and the STOXX600 hit a new record high in the early hours on Tuesday. The gains followed a positive day in Asia during which all major indexes closed higher (and Japanese markets were closed for public holidays). Wall Street benchmarks are expected to open higher as well.
According to Reuters, expectations were for a contagion peak of the coronavirus in early March. The potential for the peak to be hit now has traders excited for future economic improvements. Chinese President Xi Jinping allegedly told officials last week that the efforts to contain the coronavirus were dangerous for the economy, and that they had “gone to far”. Nevertheless, containment efforts have continued and both businesses and factories have been closed for the past few weeks in order to avoid spread of the disease. Though some factories have begun to reopen, many will remain closed for the next week at least. Chinese officials have not replied to reports that Xi has tried to reduce containment efforts.
Traders are now eyeing Federal Reserve Chairman Jerome Powell as he is slated to appear before congress on Tuesday and Wednesday for regular testimony. Markets are pricing in rate cuts of almost 40 basis points this year as a response to the damage caused by the coronavirus. Also of interest today is the Jobs Openings and Labor Turnover Study (JOLTS) for December in the U.S.
Gold prices eased from the one-week highs of $1,576.76 hit on Monday as traders shed the safe-haven asset and favored riskier assets. Conversely, the dollar hit four-month highs on Tuesday.