- S&P 500 Futures extends losses after Tuesday’s heavy losses.
- Fears of virus wave 2.0, trade war keep risk-tone sentiment down.
- US data adds pressure on policymakers to act.
- Fed Chair Powell’s speech, trade/virus updates will be important to watch.
S&P 500 Futures drop to 2,842, down 0.32% on a day, amid the pre-Tokyo Asian session on Wednesday. The risk barometer slumped over 100 points to the low of 2,833 on Tuesday, marking its biggest losing streak in three weeks.
The reason for the declines could be traced from the market’s risk aversion due to the on-going fears of the coronavirus (COVID-19) resurgence. The worrisome virus numbers from Germany and the epicenter Wuhan renew the risk of the virus outbreak 2.0 should the major economies go faster in easing the lockdown restrictions.
Also weighing on the risk-tone sentiment could be China’s trade war with the US and Australia. While the dragon nation seems to have stopped fighting against the Trump administration after announcing a second list of import items and raising soy import forecasts, it retaliated to the Aussie PM’s lobbying for the inquiry into the virus outbreak.
Furthermore, downbeat US inflation numbers exerted pressure on the monetary policymakers who are already struggling to talk down the early indicators suggesting a negative Fed rate in 2021. Recently, Cleveland Federal Reserve Bank President Loretta Mester also warned against opening the economy too early while also turning down the negative rates and fearing for the worst due to the virus.
It should be noted that Wall Street benchmarks dropped heavily during the end hours on Tuesday.
While updates concerning the trade war and the virus outbreak could direct the risks, traders will also be waiting for the Fed Chair Powell’s speech at a webinar organized by the Peterson Institute for International Economics. If the Fed leader sound worried, as he should, the current risk-off sentiment will gain additional strength.
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