Nervous investors calmed as China promises further policy stimulus to counteract the economic hit from a coronavirus outbreak.
China’s finance minister announcement on Sunday that Beijing would roll out tax and fee cuts whetted risk appetite. Further, China’s central bank cut the interest rate on its medium-term lending on Monday.
Growth of global trade in goods is likely to remain weak in early 2020, the World Trade Organization (WTO) said on Monday. The below-trend performance could become even worse due to the new coronavirus.
Some analysts think the market may be underestimating the hit from the coronavirus on both China’s economy and on growth in the rest of the world. Analysts at Capital Economics said over the weekend that it is too soon to start assessing the longer-term economic fallout from the epidemic.
Investors will be looking for February manufacturing data, particularly in Asia, for an early indication of how significantly the virus is affecting global manufacturing supply chains.
With growth faltering in the euro zone and Japan, most market players expect the U.S. economy to remain stronger among its developed world peers. However, retail sales and industrial production numbers on Friday were disappointing.
China promises to limit the damage from a coronavirus outbreak and this appears to calm markets.
Monday is light on economic data, but traders are looking to a German business sentiment indicator due on Tuesday. It was a quiet start to the week elsewhere, with much of the United States off for a public holiday.
START TRADINGForex – China promises more support measures
The dollar index stood at 99.095, near Friday’s 4-1/2-month high of 99.241.
The Australian dollar strengthened as investors assessed the latest reading on the coronavirus, where the number of cases rose but new deaths dropped. The Australian dollar rose 0.1% to $0.6724. The currency has partly been supported by expectations of stimulus from Beijing.
The Yen was unfazed by weak economic growth data in Japan, the world’s third-largest economy. The Japanese currency traded down 0.1% at 109.84 yen per dollar. Japan shrank 1.6% in the three months to December, the largest drop in six years.
The euro struggled near 3-year lows on Monday as investors worried about weakening growth in the region. The common currency earlier touched $1.0817, its weakest since mid-2017. The currency has lost 2.3% of its value against the dollar so far in February.
The British pound slipped 0.2% to $1.3015, reversing some of its gains last week. The sterling had its best week in two months as investors priced in looser financial conditions under Britain’s new finance minister. Against the euro, the pound fell 0.3% at 83.29 pence.
In commodities, oil prices were little changed. Concerns of falling fuel demand caused by the economic fallout from the coronavirus outbreak were offset by expectations that output cuts from major producers will tighten crude supply.
Brent crude was at $57.27 a barrel, down 5 cents by 0754 GMT after rising 5.2% last week, the biggest weekly gain since September 20193.
U.S. WTI crude rose 3 cents to $52.08 a barrel, after a 3.4% gain last week.
Gold prices on Monday held near a two-week high scaled in the previous session. Spot gold was little changed at $1,582.08 per ounce.
PLEASE NOTE The information above is not investment advice.
Sources: Reuters, Investing, CNN money