OVERNIGHT DATA AND HEADLINES
• U.S. manufacturing and services sectors activity stalled in February amid growing concerns about the deadly coronavirus' impact on the economy, boosting investor demand for safe-haven assets like government bonds. The IHS Markit flash services sector Purchasing Managers Index dropped to 49.4 this month, the lowest since October 2013 and signalling that a sector accounting for roughly two-thirds of the U.S. economy was in contraction for the first time since 2016. Economists polled by Reuters had forecast a reading of 53, down slightly from January's final reading of 53.4. A reading below 50 indicates contraction. The manufacturing sector barely escaped a slip into contraction, with the flash reading there at 50.8, the lowest since August and down from 51.9 in January. The flash Composite Output Index dropped to 49.6, the lowest in 76 months, from a reading of 53.3 in January.
• The PMI's readings were at odds with other flash surveys. IHS Markit's flash composite Purchasing Managers' Index for the euro zone rose in February. Business conditions also improved in the United Kingdom.
• The National Association of Realtors said existing home sales declined 1.3% to a seasonally adjusted annual rate of 5.46 million units last month, held back by a dearth of houses on the market. But the supply squeeze is likely to ease as building permits and the number of homes under construction are at levels last seen nearly 13 years ago. Economists polled had forecast existing home sales falling 1.8% to a rate of 5.43 million units in January. Last month, existing home sales were unchanged in the Northeast and rose in the Midwest and the populous South. But sales tumbled in the West, the country's most expensive region. Existing home sales, which make up about 90% of U.S. home sales, surged 9.6% on a year-on-year basis in January.
• Global equity markets slumped as the fast-spreading coronavirus drove investors into safe havens, with gold hitting a fresh seven-year high and the yield on the 30-year U.S. Treasury bond sliding to an all-time low.
• U.S. stocks sold off and the Nasdaq had its worst daily percentage decline in about three weeks - Dow Jones fell 227.57 points (0.78%) to 28,992, S&P 500 lost 35.48 points (1.05%) to 3,337 and the Nasdaq fell 174.38 points (1.79%) to 9,576.
• The U.S. DXY fell across the board after the PMI showed U.S. business activity in the manufacturing and services sectors stalled in February. DXY index fell from 99.75 towards 99.23.
• EUR was 0.68% higher, jumping up from 1.0795 towards 1.0860.
• GBP also found solid gains, bouncing up from 1.2882 lows to 1.2980 highs.
• USDJPY saw some improvement, strengthening from 112.10 down towards 111.35.
• China's yuan eased to a near 2-1/2-month low and was set for another losing week, dragged down by worries over the coronavirus epidemic. CNY opened at 7.0261 and fell to a low of 7.0426, the weakest level since Dec. 11.
• AUD plumbed 11-year lows at 0.6583 but managed to rebound on a weaker USD up towards 0.6640. AUD opened this morning back around 0.6600.
• NZD followed higher on Friday night, up from 0.6300 lows towards 0.6357. Opens lower at 0.6310 this morning.
• AUDNZD tracked lower from 1.0466 highs down towards 1.0430.
• AUDEUR suffered further losses, dropping from 0.6130 down to 0.6085.
• U.S. Treasury yields were down as mounting concerns about the economic impact of the coronavirus epidemic drove investors into safe-haven assets. Weak U.S. PMIs also attributed, with the yield on the 30-year Treasury government bond dropping to an all-time low.
• The benchmark 10-year yield was down 5.4 basis points in afternoon trade at 1.446%. It was the first time the note yielded less than 1.5% since early September 2019.
• The 30-year bond was down 5.4 basis points at 1.9181%. The session low was 1.886%, an all-time low.
• The two-year U.S. Treasury yield was down 4.9 basis points at 1.3461% in afternoon trading.
• Germany's 10-year government bond yield bounced off four-month lows after a batch of business surveys delivered healthier-than-expected views of the euro zone economy. 10 year German government bond yields fell to a four month low earlier on Friday at -0.46%, but bounced back up following the MI releases in the euro zone to trade flat at -0.44%.
• Gold jumped more than 1.5% to its highest level in seven years as investors rushed to safety due to concerns over global economic fallout from the fast-spreading coronavirus. Spot gold rose 1.8% to $1,648.75 per ounce (its highest level since Feb. 13, 2013).
• China's iron ore futures rose, marking their longest streak of gains since June 2016, as concerns over tightening seaborne supplies pushed spot prices to four-week highs. Spot prices of benchmark 62% iron ore settled at $92.50 a tonne, the highest since Jan. 22
• Copper rebounded as speculators surprised the market with a bout of buying late in the session despite a rise in new coronavirus cases in China. Three-month LME copper rose 0.7% to $5,765 a tonne after falling as low as $5,684.
• Oil prices fell about 1% on renewed concerns about crude demand being pinched by the economic impact of the coronavirus outbreak, while OPEC and allied producers appeared to be in no rush to curb output. Brent crude tumbled as more than 2% at one point before settling down 81 cents (1.4%) at $58.50 a barrel. U.S. crude futures settled 50 cents lower (0.9%) at $53.38.
ECONOMIC DATA TODAY
• No Australian Economic data today.
• New Zealand - Q4 real retail sales 1.6% 0.7% 1.4% Late 2019 saw a strong lift in monthly spending gauges.
• Germany - Feb IFO business climate survey (last 95.9, forecast 95.0). Confidence continues to be buffeted by global headwinds.
• US - Jan Chicago Fed activity index. Pointing to growth a little below trend. Feb Dallas Fed index –0.2 0.0.
AUD dropped to a new 11 year low over the Friday night session amid further coronavirus angst and reports of a continuation in global fatalities. The market drove AUD down to 0.6583 lows however a late Friday selloff in the USD saw most currencies bounce higher, AUD jumping up to test near 0.6640 highs. This morning AUD opens lower, giving up all gains to fall back towards 0.6590 lows.
The USD fell across the board on Friday after a survey of purchasing managers showed U.S. business activity in the manufacturing and services sectors stalled in February and as investors fretted over the fast-spreading coronavirus.
The new coronavirus has infected hundreds of people in Chinese prisons, authorities said on Friday, contributing to a jump in reported cases beyond the epidemic's epicentre in Hubei province, including 100 more in South Korea. International concern about the spread of coronavirus outside China grew on Sunday with sharp rises in infections in South Korea, Italy and Iran. In Italy, officials said a third person infected with the flu-like virus had died, while the number of cases jumped to above 150 from just three before Friday. Iran, which announced its first two cases on Wednesday, said it had confirmed 43 cases and eight deaths, with most of the infections in the Shi'ite Muslim holy city of Qom. Saudi Arabia, Kuwait, Iraq, Turkey and Afghanistan imposed travel and immigration restrictions on the Islamic Republic.
The potential economic impact of the disease was prominent at a meeting of G20 finance ministers in Riyadh. The International Monetary Fund's chief said China's 2020 growth would likely be lower at 5.6%, down 0.4% points from its January outlook, with 0.1 percentage points shaved from
No local Economic data today – much of the focus to remain on the coronavirus outbreaks and offshore developments.
For the AUD, remains weak for the time being. Potential to retest the Friday night high at 0.6640 however sentiment remains lower for now.
AUD trades down to 11-year low at 0.6592 before settling around 0.6600. Sentiment remains bearish and the down trend lower showing no sign of abating.
Only a move above the 10-day MA at 0.6680 would suggest down trend is ending. Lack of technical support in next 200 pips leaves AUD vulnerable.
Daily RSI’s remain low (down at 27.33) and suggest over sold territory – potential push up higher but need further progress higher to suggest this is in play.