- The S&P 500 Futures extends its losses after Tuesday’s heavy losses.
- Fears of the wave of virus 2.0 and the trade war dampen the feeling of risk.
- US data adds pressure to policy makers to act.
- Speech by Fed Powell President, trade / virus updates will be important to watch.
The S&P 500 Futures fell to 2,842, down 0.32% on a day, in the middle of Wednesday’s pre-Tokyo Asian session. The risk barometer fell more than 100 points to its low of 2,833 on Tuesday, marking its biggest losing streak in three weeks.
The reason for these declines can be attributed to market risk aversion due to persistent fears of a coronavirus (COVID-19) resurgence. The worrying number of viruses from Germany and the Wuhan epicenter renews the risk of the virus 2.0 epidemic if major economies move faster to ease the lock-in restrictions.
China’s trade war with the United States and Australia could also weigh on the sense of risk. While the dragon nation appears to have stopped fighting the Trump administration after announcing a second list of import items and increasing the forecast for soybean imports, it has responded to the Aussie PM lobbying for the investigation of the virus epidemic.
In addition, bearish US inflation figures have put pressure on monetary policy makers who are already struggling to lower early indicators suggesting a negative Fed rate in 2021. Recently, the president of the Cleveland Federal Reserve Bank, Loretta Mester, also warned against opening the economy too early while turning down reducing negative rates and fearing the worst because of the virus.
It should be noted that the Wall Street benchmarks fell sharply during the late hours on Tuesday.
While updates to the trade war and the virus epidemic may direct risks, traders will also be waiting for the speech by Fed Chairman Powell at a webinar hosted by the Peterson Institute for International Economics. If the fed The leader seems worried, as it should be, the current feeling of risk will gain strength.