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Top 5 Things to Know in the Market on Wednesday, February 19th

EconomyFeb 19, 2020 11:56
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By Geoffrey Smith -- Apple's sales warning is a dim memory as risk assets march higher, along with gold, on expectations that central banks will pick up the pieces if the coronavirus does hit the world economy badly. Five Federal Reserve officials' speeches today will test that thesis. Mike Bloomberg makes his debut in the Democratic Party debate this evening, and crude hit a three-week high ahead of the release of private estimates of U.S. oil stocks later. Here's what you need to know in financial markets on Wednesday, February 19th.

1. Melt Up; Gold touches 7-year high

After a sell-off that lasted almost 24 hours, markets are back in risk-on mode, convinced that the economic impact from the Covid-19 outbreak will be brief and manageable, and equally convinced that global central banks will support markets at current levels even if it isn’t. Turkey's cut its key rate for a sixth time in a row Wednesday, by a larger-than-expected 50 basis points.

Indicators of excess flashing red include a seven-year high for gold futures at $1,613.95, and another 7.4% rise in futures on Palladium, as portfolio investors pile into a supply squeeze caused by production issues in South Africa and a surge in demand from the automotive industry, its biggest user.

That comes against the backdrop of another surge in Tesla (NASDAQ:TSLA) stock after analysts at Piper Sandler raised their price target by 27% to $928, citing the outlook for its energy generation and storage businesses. That means that Wall Street now has at least one analyst supporting the optimism of Tesla’s notoriously bullish retail investor base.

2. Fed speeches, minutes to provide reality check

The thesis of central banks coming to rescue will be tested in the course of the day as a succession of Federal Reserve officials step up to the microphone. Cleveland Fed President Loretta Mester is first up at 8:30 AM along with Atlanta Fed President Raphael Bostic. They’re followed by Minnesota Fed President Neal Kashkari at 11:45 AM and Dallas’ Robert Kaplan at 1:30 PM. Richmond’s Thomas Barkin rounds off the procession at 4:30 PM.

The more backward-looking publication of minutes from the Fed’s last policy meeting will also be out at 2 PM ET.

There’s also January data for housing starts and building permits, as well as January’s producer price inflation numbers.

3. Stocks march higher, shrug off Apple's warning

U.S. stock markets are set to open higher after shrugging off Apple’s warning that it would miss its first-quarter sales target due to the Covid-19 outbreak.

By 6:40 AM ET (1140 GMT), the Dow 30 futures contract was up 59 points or 0.2%, while the S&P 500 Futures contract was up 0.1% and the Nasdaq 100 contract was up 0.3%.

Overnight, the Stoxx 600 in Europe hit a new record high but Chinese stock indices were mixed, as official data showed the official death toll hitting 2,000, and the number of confirmed cases topping 75,000.

Coincident economic data continue to show a mixed picture, with less than three-quarters of Macau’s casinos taking advantage of the right to reopen on Thursday, deeper cuts to refining runs at refineries, and extensive pay cuts and arrears at Chinese companies.

4. Bloomberg makes his campaign debut

Mike Bloomberg takes the stage with other candidates for the Democratic Party nomination for the first time in a televised debate at 8 PM ET (0100 GMT on Thursday).

The billionaire ex-Republican mayor of New York launched a media blitz earlier this week, but has yet to be challenged seriously either by voters or by the other candidates, who are sure to target him tonight. Bloomberg’s campaign said on Wednesday he would sell his financial information company – valued by some at around $60 billion – if elected.

The debate comes ahead of next week’s primary in Nevada, which arguably represents ex-Vice President Joe Biden’s last chance of resurrecting his campaign, and which also tests the ability of Vermont Senator Bernie Sanders and South Bend Mayor Pete Buttigeig, to garner support among the Latino and African-American communities, a factor seen as crucial to their chances of defeating Donald Trump in November.

5. Oil hits three-week high ahead of API.

Crude oil futures are extending their recovery. By 6:40 AM ET, they were up $53.02 a barrel, near their highest in three weeks.

The American Petroleum Institute is due to release its weekly estimate of U.S. supplies of crude and refined products at 4:30 PM, against a backdrop of expectations for an increase of 3.77 million barrels in crude inventories.

U.S. shale companies reporting after the closing bell on Tuesday also provided a glimpse of light at the end of the tunnel, with Diamondback Energy and Devon Energy both beating expectations for earnings in the last three months of 2019.

Top 5 Things to Know in the Market on Wednesday, February 19th

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