In early Asian trading on Monday (February 17), China released its latest outbreak data: 2,048 new cases of coronary pneumonia were confirmed nationwide yesterday, bringing the total number of confirmed cases to 70,548. Investors will continue to keep an eye on developments this week, as well as economic data and news from Central Banks, with a focus on the fed minutes. In its latest move, the people’s Bank of China cut the one-year MLF interest rate. Chinese stocks extended gains after the central bank cut interest rates.
China’s central bank just cut interest rates
The people’s Bank of China (pboc) launched a 200 billion yuan medium-term lending facility (MLF) and a 100 billion yuan seven-day reverse repo operation on Feb. 17 to hedge the impact of the central bank’s reverse repo expiration and maintain reasonably abundant liquidity in the banking system, the central bank said in a statement on Monday.
According to the central bank announcement, the one-year MLF operation bid-winning rate is 3.15%, compared with 3.25% last time.
Chinese stocks extended their rally after the central bank cut interest rates. The Shanghai index rose more than 1 percent, while the chinext index rose nearly 2.3 percent, led by pesticides, agriculture, military industry and aquaculture.
On Feb. 11, wang tao, chief China economist at ubs investment research, predicted that the central bank would continue to expand liquidity to keep credit markets and bond rates low, with another 10-point MLF rate cut expected in February, and possibly a bigger drop in the lending base rate.
A total of 70,548 cases were confirmed nationwide
From 0 to 24:00 on February 16, 31 provinces (autonomous regions and municipalities directly under the central government) and the xinjiang production and construction corps reported 2,048 new confirmed cases, 105 new deaths (100 in hubei, 3 in henan and 2 in guangdong), and 1,563 new suspected cases, according to the latest update from the national health and fitness commission on Monday.
On the same day, 1425 new cases were cured and discharged from hospital, 28,179 close contacts were released from medical observation, and 628 cases of severe illness were reduced.
As of 24:00 on February 16, the 31 provinces (autonomous regions and municipalities directly under the central government) and the xinjiang production and construction corps reported 57934 confirmed cases (including 10,644 severe cases), 10,844 cured and discharged, 1,770 deaths, 70,548 confirmed cases and 7,264 suspected cases. A total of 546,016 close contacts were traced, and 150,539 close contacts were still under medical observation.
The fed minutes hit this week
In addition to keeping a close eye on the outbreak this week, investors will also be captivated by a flurry of economic data and central bank developments. This includes inflation data from European countries on Thursday and purchasing managers’ indices from major European countries on Friday.
Key U.S. economic data include Tuesday’s New York fed manufacturing index, Wednesday’s PPI and housing starts, Thursday’s Philadelphia fed manufacturing index and Friday’s U.S. manufacturing purchasing managers’ index.
On the central bank front, the reserve bank of Australia will release minutes of its monetary policy meeting on Tuesday, and a number of fed officials will speak during the week. The minutes of the fed’s January meeting will get the most attention.
At 03:00 Beijing time on Thursday, the federal open market committee will release the minutes of its January meeting.
Daniel Ghali, the commodity strategist at TD Securities, said: “we will get the fomc minutes and it will be interesting to watch as always. The theme that the threshold for the fed to raise rates is much higher than the threshold for rate cuts is likely to remain relevant.”
The fed left its benchmark interest rate unchanged at its January policy meeting, citing moderate economic growth and a strong job market.
Federal reserve chairman colin Powell was upbeat about the U.S. economy in congressional testimony last week. Despite the virus threat, Mr. Powell said the fed’s policy was well placed after a series of rate cuts in 2019.
“As long as the latest economic information is broadly consistent with this outlook, the current monetary policy stance is likely to remain appropriate,” he said.
Gold could rise to 1600?
With gold at the high end of its narrow trading range, some analysts say coronavirus-related shocks could push prices to $1,600 an ounce or more.
Rhona O ‘Connell, head of market analysis for Europe, Middle East, Africa and Asia at INTL FCStone, told Kitco News on Friday: “if gold is going to go higher, it’s going to be some kind of external shock that could push gold higher.”
Jennifer McKeown, head of global economic services at Capital Economics, and Bethany Beckett, assistant economist, said the biggest risk the coronavirus needs to watch for is that it could trigger a “black swan” event in China or elsewhere in the world.
Resistance for gold remains at $1,600, and prices remain close to that encouraging level, said Everett Millman, an expert on precious metals on Gainesville Coins.
“If we go above $1,585, we’re bullish, maybe up to $1,600,” Millman said.
Kitco data released on Friday showed respondents to its golden week survey were bullish about gold prices in the coming week, saying technical factors and continuing concerns about how coronavirus could affect the global economy would keep gold prices firm even as the dollar and stock markets strengthened.
Seventeen market professionals took part in the Wall Street survey. Eleven professionals (65%) expect gold prices to rise. One professional (6 percent) thinks gold will fall, while five (29 percent) think the market will move sideways.
Meanwhile, a total of 726 ordinary investors were surveyed. A total of 472 ordinary investors (65%) expect gold prices to rise this week. Another 148 (20 percent) think gold will fall, while 106 (15 percent) are neutral.
As for gold’s next performance, analyst Anil Panchal wrote that gold was still ahead of concerns about the new coronavirus in China. Recent negative news about Britain’s decision to leave the European Union has also fuelled risk aversion. Despite recent efforts by China to soothe the market, the growing number of new cases of coronary pneumonia continues to worry about the market.
From a technical perspective, the downtrend line since January 2008, currently around $1,585, could limit gold’s short-term gains, Panchal said. However, the eight-day uptrend line, currently at $1,570, could pose a challenge for intraday shorts.