While China is slowly getting back to normal, fears over the economic fallout from the spread of coronavirus beyond its borders remain to the fore, so remarks by central bank officials from the U.S. and Europe will be watched for their outlook on the global economy. It’s a quiet week for data with durable goods orders, consumer confidence, and the second reading of fourth quarter growth due out in the U.S. Investors will continue to monitor the U.S. dollar’s progress after it was last week’s big winner in foreign exchange markets (despite Friday’s declines). And while most of earnings season is already in the books, this week will bring results from consumer facing companies. Here’s what you need to know to start your week.
G20 calls for coordinated response to coronavirus
Finance officials from the world’s 20 biggest economies on Saturday called for a coordinated response to the coronavirus outbreak, which the International Monetary Fund predicted would pull down China’s growth this year to 5.6% and cut 0.1% from global growth.
“But we are also looking at more dire scenarios where the spread of the virus continues for longer and more globally, and the growth consequences are more protracted,” said IMF Managing Director Kristalina Georgieva at the G20 Finance Ministers and Central Bank Governors Meeting.
China reported another fall in new cases on Sunday, but world health officials warned it was too early to make predictions about the outbreak as the number of new cases continued to increase in other countries.
Chinese PMI data on Saturday will show the first signs of the outbreak on the world’s second largest economy.
Can the dollar index breach the 100 level?
Leaving aside Friday’s declines, triggered by disappointing U.S. PMI data for February, last week saw the greenback rally to a near three-year high versus the euro, a 10-month high against the yen and an 11-year peak versus the Aussie. So far this month it has risen more than 2% against a currency basket.
The U.S. economy’s relative resilience to coronavirus has made the greenback the safe-haven of choice, at least temporarily.
The weak economic outlook in the eurozone and Japan against the background of the coronavirus epidemic is likely to continue to weigh on the euro and the yen.
The selloff in the yen marks a departure from the pattern in recent years where the Japanese currency rises in times of geopolitical or market turmoil due to Japan’s status as the world’s largest creditor nation.
“All considered we think the dollar should at least retain its strength, with a chance for more appreciation,” FX analysts at ING said in a note. “At this stage, we suspect that a break above 100 in DXY is just a matter of time.”
Fedspeak, U.S data
Federal Reserve Vice Chairman Richard Clarida is to speak at an economic policy conference in Washington on Tuesday, where other speakers include IMF Chief Economist Gita Gopinath and Cleveland Fed President Loretta Mester. Minneapolis Fed President Neel Kashkari and Dallas Fed President Robert Kaplan are also set to make appearances this week, with investors on the lookout for any comments on the virus impact.
Also on Tuesday, a report on U.S. consumer confidence will be closely watched for any indications that the global coronavirus outbreak is hitting sentiment.
Thursday’s durable goods orders data is forecast to be weaker amid a slowdown in factory output in Asia, while the halting of Boeing (NYSE:BA) 737 Max production in mid-January is also likely to weigh. Meanwhile, the second reading of U.S. fourth quarter growth is not expected to be subject to a major revision.
Monday’s German IFO report will be central to the direction of the euro this week. The Investing.com consensus is for a reading of 95.3 in the Business Climate Index, down from 95.9 in January. Other key releases will be Friday’s inflation numbers for Germany and France which will be closely watched ahead of the upcoming European Central Bank meeting in March.
ECB President Christine Lagarde is due to deliver remarks at an event in Germany on Wednesday, while several other ECB officials, including Chief Economist Philip Lane will also give speeches this week.
Estimates from Refinitiv point to growth of 3.1% in the S&P 500’s fourth-quarter earnings, defying expectations for a year-over-year decline. In January analysts had forecast a 0.3% fall.
Those figures don’t reflect damage from coronavirus and earnings growth has been boosted by stronger-than-expected results from tech giants including Microsoft (NASDAQ:MSFT) and Apple (NASDAQ:AAPL).
This week investors will get results from more consumer-facing companies, including retailer Macy’s (NYSE:M), whose credit rating was cut to junk last week by S&P Global (NYSE:SPGI). Results also are due from Marriott International (NASDAQ:MAR), but that won’t reflect the hit it and other hotel chains are currently taking throughout Asia.
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