European investors are pushing the markets higher fuelled by China's optimism. As we discussed yesterday, China is sending a strong signal to markets that Beijing is equipped to support the markets with whatever it takes. Apple's revenue warning jolted the market's yesterday.

Investors questioned the resilience of the bull rally in equity markets. The question was: How big would be the impact of the coronavirus on corporate earnings?

Yesterday, the biggest game in town was trading the risk-off assets, and this is why we saw the VIX index blasting through the roof again. It surged over 7.65% yesterday. This was the biggest move since it jumped 21.6 percent on Jan 31. Over the 52 weeks, the index is down by 0.34%, but the 30-day price volatility has soared to 124.4% compared to 122.15%.

Today, the buoyancy is fueled by speculations that China may directly inject cash to cushion its airline industry. The entire industry is going through the toughest time. Its airline industry has shrunk to such a small size that Portugal's airline industry looks like a giant. Given the fact that Beijing is going to provide its support, it pushed the airline stocks higher such as China Eastern and Hainan Airlines.

We think in the coming days, there could be some intriguing mergers as bigger players take over smaller ones, and government subsidies may provide an extra lifeline.


UK Inflation

At 09:30 UK time, we are going to see the UK's CPI y/y inflation number. The headline number hit the lowest point since December 2016. This has supported consumer spending during the time of Brexit uncertainty, which was powered by the incompetent behavior of lawmakers. Today's CPI number is likely to tick higher due to the rise in train fares, but heavy discounts offered by the retailer due to deprived December sales period may offset some of that effect.


FOMC Meeting Minutes

Later in the day, we have the FOMC meeting minutes and, the hopes are that the Fed acknowledges the softness in the industrial data and pays courtesy to corporate earnings. Disruption in the supply chain is not something that can be eased off that easily. Market participants want the Fed to provide them some kind of assurance as well.



In the commodity space, Gold price blasted through the 1,600 – mark once again – for the second time this year. The fact that the price is still holding on to this level, confirms that something is being cooked under the hood. What I mean by this is that investors aren't fully convinced about buying the dip mentality.


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