Powell encourages | Fundamental analysis

Powell encourages | Fundamental analysis

Written by: PaxForex analytics dept - Wednesday, 12 February 2020 0 comments

Against the background of the coronavirus spreading slowdown, as well as encouraging comments from the Head of the US Federal Reserve Jerome Powell and increasing liquidity, the US stock indices are updating their highs, for example, the S&P 500 made 3374.38 p. by 18.30 GMT yesterday, for the parent instrument - 3375.64 p. In yesterday's speech, Jerome Powell said that his agency would continue to buy treasury securities in the second quarter - the earlier positive market was associated with the period until April. Also, Powell said that there was no reason to adjust interest rates. A large number of traders expect that the interest rate can be changed no sooner than July 2020.
The whole positive picture was slightly spoiled by economic statistics: the consensus forecast for December, the number of job openings in the U.S. was 7 million, which showed growth. But as the actual data shows, the growth was followed by a decline to 6.4 million, which is less than in May 2018.
This economic indicator, the pride of U.S. President Donald Trump, has been showing a downward trend since February 2019.
In any case, the overall economic picture in the U.S., strong macro statistics, the continued injection of liquidity by the Fed, the yield of their bonds leaves investors no choice.
As for the Chinese coronavirus, which was officially named Covid-19, market participants filter the information and above all see that the number of new infections has dropped significantly to several hundred per day, which respectively affected Chinese stocks, which ended the sixth consecutive session in the plus.  WHO Director-General Tedros Adan Gebreisus also said that the vaccine will be ready in 18 months and that coronavirus is infectious but less dangerous than SARS. Although various sources report that the serum can be ready within two months.
China's top priority is to get its businesses back up and running quickly after New Year's holidays. According to official data, the country's key-controlled food production and processing enterprises are still 5.3% short of full recovery. 
It is too early to say yet that all negative factors have gone and the markets are beginning to recover. Any, even the slightest, deterioration of the situation will lead to a new wave of exit from risk assets. These positive factors are easy to control.