Asian equities weighed lower by the new coronavirus outbreak in China
The heightened risk situation is reverberating across risk assets in markets today as equities are keeping lower and bonds are higher ahead of European trading.
The Hang Seng is down by 2.5% - Moody's Hong Kong credit downgrade not helping as well - while the Shanghai Composite is down by 1.3% with airline stocks taking a heavy hit on the virus contagion fear ahead of the Chinese New Year holidays.
From a trading perspective, the thinking here is that this should be something similar to how markets reacted to the Ebola virus back in October 2014.
However, you have to consider that we just had the US-China trade deal last week and this is the first negative catalyst to strike amid some possible anticipation of investors taking money off the table - US equities at all-time highs.
If earnings season - especially for major tech players next week - turn ugly, it could spell a further and deeper correction in Wall Street and potentially for overall risk trades in the near-term. So, just be mindful of that when weighing up the situation today.
For now, risk is in a softer spot and that is keeping USD/JPY near the lows for the day at 109.94 while gold is up 0.3% to $1,565.78.
