February 11, 2020

Coronavirus Remains A Focal Point

Coronavirus is the biggest threat flashing
on traders’ platforms on Monday morning. Investors are concerned about the
rising number of deaths in China and workers are unable to return to work. The
fear is that by opening factories you increase the risk of contamination.

Apple’s stock is likely to be hit in Europe
and in the US session today because Foxconn, one of the biggest suppliers of
the iPhone, wasn’t able to open its production plant because of the virus
outbreak. Previously, it was anticipated that the company would open its
factory today, but the risk to human life takes precedence over the economic
impact.

The Coronavirus has influenced Chinese
consumer prices, the data recorded their biggest year-on-year jump since 2011.
It jumped to 5.4% and producer prices rose 0.1% year-on-year.

The hope is that factories would resume work
during this week and hopefully, if that happens, then the impact on global
growth would not be too detrimental—perhaps 20-25 basis points. However, if
China fails to resolve the issues, and the factories continue to be affected by
the virus’ influence, then expect the growth to have a more devastating
influence, maybe over 70 basis points impact on the GDP number during the first
quarter.

Commodities

Oil prices continue their downward trend
and traders fail to show any interest because of the supply concerns. We are
expecting oil prices to extend their losses today because the largest importer
of oil, China has some serious issues to resolve. Crude dipped below the
critical level of $50 before it went back up, but the fact that the prices have
crossed the significant support zone tells me that bulls are no longer in
control of the price and it is likely that the price would move towards the $48
mark. Hope was that Russia would give up its position and listen to Saudi
Arabia which wants a production cut. But so far, the country hasn’t made a
decision and still thinks that it needs more time to consider its position on whether
or not to support oil production.