Managing the risk
Despite the best efforts of the Chinese government, the coronavirus continues to spread. A report this morning said that 4,515 people have been infected, half the number affected by the SARS outbreak in 2003 that knocked an estimated 2% off China's gross domestic product.
Seventeen years ago it took SARS around two months to spread to 456 people. Coronavirus has infected ten times as many as that in little over a week. Consequently, China has clamped down on travel, both domestically and abroad. That will have a detrimental effect on Chinese tourist destinations, including Thailand, Japan, Vietnam and Australia. In recognition the fact that 15% of visitors to Australia come from China, the Aussie lost ground for a sixth consecutive day, putting it 1.8% lower on the week against sterling.
Commentators are divided about the longer-term economic implications of the outbreak. A pessimistic argument is that it will have a "significant" impact on Chinese growth, however some investors maintain that any downward trend for the economy will not extend beyond the first quarter. Until now, investors have struggled to see the optimistic side of that coin. The safe-haven Japanese yen and Swiss franc shared first place on Monday with the US dollar, the British pound and the Chinese renminbi.
Nothing to see
Although more disappointment than joy was to be found among Monday's economic data, the numbers had little impact on currency prices. The North American dollars, euro, franc, pound, yuan and yen were virtually unchanged against one another while the krone struggled in last place for a second day.
ISO's business climate index, an "early indicator of economic developments in Germany", found sentiment among managers "somewhat diminished". Broadly, they are comfortable enough with the current situation but have a "more pessimistic outlook for the coming months". UK mortgage lending by BBA members in 2019 was 1.1% less than the previous year though the number of mortgage approvals went up by 7.4%.
US data showed new home sales falling 0.4% in December. The Dallas Fed's manufacturing index came in three points higher and three points above forecast at -0.2. Overnight, NAB's monthly business survey provided "further evidence that activity stabilised in Q4".
Durable goods and Aussie inflation
This morning Switzerland issued its monthly reminder that a weak currency is not essential to export success. The two key data sets will be US durable goods orders this afternoon and Australian consumer prices tonight.
Next out this morning will be Spanish unemployment (probably around 13.8%), followed by Swedish producer prices, retail sales and trade surplus. The CBI will publish its distributive trades survey of UK retail sales in January.
US durable goods orders are expected to have risen by a monthly 0.5% in December but the statistic is notoriously difficult to forecast. Nondefense capital goods orders ex-aircraft are supposed to be unchanged. US house prices and consumer confidence also come out after lunch. Headline Australian inflation tonight is pencilled in at an unchanged 1.7%.