By Michael McCarthy (chief market strategist, CMC Markets and Stockbroking)
Shares and important industrial commodities rose in overnight trading as services PMIs showed economic expansion in
major economies. German, French and British stock markets are within a few percent of all-time highs, and the US S 500 and Nasdaq Composite indices set new records.
Authorities in Beijing announced cuts to fees and taxes, and support for banks, in response to the economic impact of
the coronavirus outbreak. Copper ended its worst run of losses, rallying by almost 2% after dropping for 14 straight
days. Crude oil also gained, despite a build in US inventories. The lift in industrial commodities indicate increasing
confidence about the global demands outlook.
In the past 24 hours Japan, China, Italy, France, Germany, the UK and the US all released services and composite
economic activity indices. Every reading showed expansion in January. ADP data showed US jobs grew by 291,000 in
January, smashing estimates closer to 160,000. The macro evidence of rude economic health around the globe is a key
factor in the overnight gains.
The US dollar and commodity currencies firmed on the increasing optimism.
Futures markets point to opening strength in Australia, Japan and China. Unsubstantiated reports of a “cure” for the
newly discovered coronavirus may have played a part in the overnight gains. The World Health Organisation denied these
rumours, but trading was largely unaffected. Markets are now pricing a temporary and minor impact of the outbreak. Any
evidence to the contrary could see sentiment reverse sharply.