U.S. equity futures fluctuate and USD rates edge lower as investors and economists alike scramble to forecast and better understand the economic impact over the 2019-nCoV or novel (new) coronavirus outbreak. The general assumption currently baked into markets is that while there will be a significant impact on China and its trade partners in the first quarter of the year, the impact is temporary and is expected to recover during the rest of 2020. One of the key things to watch this week is whether factory shutdowns result in layoffs.
Compared to a week ago, the number of confirmed cases worldwide has increased from over 17,000 people to over 40,000 people, with a majority of the confirmed cases in China. The ratio of mortalities from the new virus continues to hover around 2.2%. As a glimmer of hope, the ratio of those previously infected and being discharged from the hospital has steadily increased from 2.76% a week ago to 8.12% today. By comparison, the U.S. alone has had at least 22 million flu-related illnesses, 210,000 hospitalizations, and 12,000 deaths from the flu thus far, according to the Centers for Disease Control and Prevention (CDC) for the week ending February 1, 2020.
If market fears increase, we may see the 3-month T-Bill (1.552%) and 10-year UST invert again this week. The U.S. 10-year Treasury is trading 2.4bps lower to 1.561%.
Strong U.S. Jobs Data
- +225,000 non-farm jobs were created in January, likely due to the unseasonably warm weather.
- +44,000 construction jobs were created.
- +36,000 leisure and hospitality jobs were created.
- The unemployment rate edged up to 3.6% from 3.5%.
- The participation and employment-to-population rates both reached new cyclical highs in January.
- Wage growth increased by a moderate +0.2%, month-over-month.
- Annualized wage growth down to +2.9%, from +3.1%.
- Fed unlikely to do anything within the 1st half of the year.
Key events coming up this week:
- Federal Reserve Chairman Jerome Powell will deliver his semi-annual testimony in Congress on Tuesday and Wednesday.
- The new European Central Bank President, Christine Lagarde, is scheduled to speak at the European Parliament in Strasbourg, France on Tuesday.
- CPI inflation data is scheduled to be released on Thursday.
- On Friday, China and the U.S. are expected to lower tariffs on billions of dollars worth of imports, as part of the trade deal signed last month.
