Today we received reassuring news from China that the Covid-19 epidemic might finally be under control, or is at least approaching that state. There were fewer new patients infected, according to the latest data, so the coronavirus might be past its peak. In addition, the government has hinted that it may implement more stimulus measures to support the economy and mitigate the damage done by the viral outbreak.
The markets welcomed the news with optimism, with stock indices rising in Europe, Japan, and the United States. Only Chinese stocks resist market optimism, because many of the country’s businesses and factories remain at limited capacity to avoid the further spread of the disease.
There has been a modest recovery in the crude oil market today. The United States blacklisted the Russian Rosneft due to its alleged ties to the government of Venezuela. The US is exerting pressure on Venezuela because it wants Maduro to step down from office since his mandate was found illegitimate, and allow Guaido to serve as an interim president until democratic elections could be organized.
With the latest move of the United States against Venezuela’s ability to sell oil, there will be a tightening in supply which will compensate for the lower demand from China, thus pushing prices up. Today the Brent crude reached $58.26, while the WTI is trading near $52.60.
Today we also received the January CPI report from the United Kingdom. According to it, inflation increased by 1.8%, which is better than anticipated. Though this news offered some minor support for the British pound, investors do not see it as a long-term trend. In fact, inflation is expected to drop lower when the UK and the EU get serious about their trade negotiations and the real separation of the United Kingdom from the bloc inches closer.
