Early Morning Call: Markets hold losses as China Covid cases rise
With little news flow and data, except US unemployment claims, natural gas storage and crude oil inventories, to hand, Axel Rudolph focused on those markets which technically look interesting.
Overnight US and then Asian equity indices lost ground as fears that the end of strict Covid-19 measures in China, a country of 1.4 billion people, could result in a massive spread of the virus worldwide.
On Wednesday the US announced that from 5 January all arrivals from China will have to provide negative Covid-19 test results taken no more than two days before their flight with similar measures being put in place by countries such as India, Taiwan, South Korea, Malaysia, Japan and Italy.
According to the Bloomberg news agency almost 37 million people may have been infected with the virus on a single day last week, leading to fears in some quarters that the China Lunar New year holiday in January might spread a new variant of Covid-19 and cripple the world economy.
The UK government said it had no plans for mandatory Covid-19 tests for arrivals from China but indicated that it was monitoring the situation closely.
The FTSE 100 continues to hold up well compared to its US counterparts with both the S&P 500 and Nasdaq 100 remaining in short-term downtrends, close to significant technical support. While EUR/USD continues to trade in a tight, low volume range, EUR/GBP is being capped by its October peak and AUD/USD has resumed its descent.
WTI over the past three days has embarked on another down leg while US natural gas prices fell to their lowest since March this year, on a warmer-than-expected winter season in Europe and the US following the current extreme cold snaps, pointing to a build-up of inventories and low fuel usage amid declining production levels.
Prices in Europe are more than 75% below record levels of nearly €350 hit in August, as record LNG imports and fuller-than-normal stockpiles amid increased wind generation, ease concerns about shortages. Natural gas prices in Europe are now trading at levels previously seen before the Russia-Ukraine war.
Gold, despite remaining on an upward trajectory, looks potentially fragile since the December advance has been accompanied by negative divergence on the daily Relative Strength Index (RSI) and a break out of the current wedge formation on the daily chart may take it back to the $1,774 to $1,765 per troy ounce support zone in early January.
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