Dow Jones, Nasdaq 100, DAX 30, Outlooks:
- The Dow Jones retreated last week as coronavirus fears worked to erode risk appetite
- The Nasdaq 100 followed suit, but will look to earnings from Google next week for influence
- With an economic calendar nearly devoid of high-impact data for the country, the DAX 30 will likely ride the broader risk trends associated with the coronavirus
Dow Jones Forecast
The Dow Jones retreated last week as airlines and businesses shuttered activities in China following the outbreak of coronavirus which has infected more than 10,000 people and claimed more than 200 lives. While health officials are still trying to discern the exact danger posed by the virus, economists have begun to forecast damage to the Chinese – and therefore global – economy.
Dow Jones Price Chart: Daily Time Frame (October 2018 – January 2020) (Chart 1)
Already, Starbucks, Apple and Google have scaled back business operations in China. In their earnings report last week, Starbucks announced more than half of its Chinese stores had closed. Apple announced a similar reduction in its earnings update, and various global airlines have cancelled operations into and out of China.
( 16:02 GMT )
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With no end in sight, the exact impact of the virus on the global economy is unknown, but equity traders have started to adjust valuations nonetheless. Since there are so many unknowns, initial stock reactions may be particularly volatile as investors look to reduce exposure to uncertainty. Therefore, the Dow Jones and Nasdaq 100 appear vulnerable in the week ahead.
Nasdaq 100 Forecast
While the coronavirus looks poised to dominate the headlines, the Nasdaq 100 will have a corollary influencer in quarterly earnings from Google. Scheduled for Monday afternoon, the high-profile report could arrest control for tech sentiment, following strong performances from Apple, Microsoft and Amazon.
So, while virus fears are likely to be in the driver’s seat, Google could create a modest divergence in performance between the Dow Jones and Nasdaq but I am hesitant to suggest Google can completely eradicate the larger macroeconomic headwind. In the meantime, follow @PeterHanksFX for updates and insights
DAX 30 Forecast
Like the Dow Jones and Nasdaq, the DAX 30 will trade in communion with coronavirus concerns. While the European Union and the United Kingdom have officially parted ways, market participants have had ample opportunity to adjust their outlooks and valuations accordingly, so there should be minimal market reaction to the theme in the week ahead.
DAX 30 Price Chart: Daily Time Frame (March 2019 – January 2020) (Chart 2)
With that in mind, an ideal outcome for equity markets would be an improvement in coronavirus containment or treatment. Until then, shuttered businesses and depressed travel will continue to weigh on economic productivity and expected profits.
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–Written by Peter Hanks, Junior Analyst for DailyFX.com