US Open – Coronavirus, Earnings, Brexit Day, Gold, Oil, Bitcoin

Brexit Day is Upon Us

Stock markets have slipped into the red again on Friday, as the WHO upgraded the coronavirus outbreak to a global health emergency.

Source – Thomson Reuters Eikon

The announcement didn’t exactly come as a surprise, it’s been speculated about for days, but coming alongside the latest worrying numbers – around 10,000 infected, more than 200 dead – including the first reported cases in the UK and first human-to-human transmission in the US, it’s certainly overshadowed the earnings stories that have lifted markets at times this week.

The worrying thing is how much worse the numbers could look when the markets reopen next week, given just how rapidly they’re rising. Huge efforts are being made to contain the virus and yet, the numbers are already massive.

It’s clear there’s going to be an economic price as well as various businesses rightfully put safety ahead of profit. It’s just extremely difficult to quantify what that will be at this moment as we don’t know how long it will last and how much worse it will get. Companies are seeing their share prices take a beating though as investors fear the worst and hope for better.

Bumper earnings week as Amazon surges 10% in pre-market

It’s understandable that in weeks like this, earnings season can go under the radar to an extent but investors have found cause for optimism at times as some of the big players report bumper results. Apple, Tesla and Amazon have all blown investors away this week and given investors food for thought as virus fears drag on market sentiment.

It’s a quieter day on the earnings front and yet one that includes results from Exxon Mobil and Caterpillar, which will be of particular interest given the slowdown we saw last year especially in China as the country went toe to toe with the US on trade. Amazon shares are up more than 10% pre-market after their results, providing some positivity in an otherwise gloomy market on Friday.

Let the Brexit celebrations begin

The UK officially leaves the European Union at 11pm this evening – UK time – after three and a half years of bitter debates, three Prime Ministers and I’ve lost count of how many Parliamentary votes. I don’t think anyone is going to look back fondly on the last few years in the UK and even those that remain opposed to Brexit will probably be relieved at this point to be finally moving on.

It’s been an eventful period for the currency, to say the least, but with the withdrawal bill having now passed through all of the necessary channels in both London and Brussels, this evenings exit is just a formality. I don’t foresee any last minute  wobbles for the pound as focus now shifts to the trade deal and avoiding WTO Brexit on 31 December.

Oil down almost 20% over the last few weeks

Oil prices have been extremely vulnerable to the outbreak, as highlighted in the near-20% plunge over the last few weeks. Brent has broken back below $60 a barrel and finds itself trading around October levels when we were talking about OPEC+ cuts. The cartel stands ready to act again if necessary but may accept the short-term pain for now on the expectation that the economic consequences won’t be as bad as people fear and price will bounce back to more acceptable levels on its own.

Brent Daily Chart

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Gold pushing higher but facing strong headwinds

Gold is both continuing to find favour as a traditional safe haven and, at the same time, run into strong resistance on the run up to $1,600 which is keeping a lid on gains. The yellow metal is finding it hard enough to break and hold above $1,580, let along get closer to the next big handle, where sellers poured in last time it was breached earlier this month. That may change come Monday should the situation in China escalate to more worrying levels.

Gold Daily Chart

Bitcoin still not a safe haven

It doesn’t take much to see that I don’t buy into the bitcoin is a safe haven premise. That’s not to say that I don’t believe that there aren’t large numbers, particularly in the community, that think its true and that they aren’t buying on the hope that they’re right.

Rather, it just doesn’t behave on a consistent basis like a safe haven, nor has it been tested in times of real stress. Not to mention that is has no fundamental value right now like other safe havens do. With bitcoin trading down 3% today even as other risk assets slip on coronavirus fears, I find myself no more convinced.

Bitcoin Daily Chart

Source – Thomson Reuters Eikon

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