Market sentiment has improved somehow, with global stocks seem to be stabilizing after another aggressive sell-off. Chinese equities shifted into a recovery mode after a dip by over 7% on Monday. In many ways, the risk-on trades started to reemerge as the Chinese government announces a series of measures aimed at calming down the financial markets amid the lingering concerns over the spreading of a coronavirus.
Also, investors cheered solid economic data out of the United States, where the ISM manufacturing PMI rebounded unexpectedly to 50.9 in January, the highest print since July, from 47.8 previously and versus 48.5 expected. Furthermore, new orders index improved to the highest figure since May and arrived at 52 while prices paid index climbed to a 10-month high of 53.3. The series of updates helped to further ease market concerns over a possible recession in the country and lifted the greenback along with Wall Street indexes.
Further on, market sentiment could be additionally supported by the OPEC+ meeting due on Tuesday and Wednesday. Should the exporters of the group recommend strong measures to shore up the struggling oil market, crude oil prices may stage a recovery from more than one-year lows around $54 and thus fuel risk sentiment globally.
Despite the bearish pressure has abated, risks continue to persist, as the situation surrounding the coronavirus remains unresolved, and the number of infected people in China continues to grow. Against this backdrop, the measures taken by the government may not be enough to prevent a more outspoken panic in the global financial markets in the short and medium term. Moreover, investors are getting frustrated by the preliminary estimates of negative consequences from the virus outbreak for the economy. By the way, according to Goldman, the effect from the coronavirus will take away 1.6% from China GDP in the first quarter. In other words, investors will likely remain cautious in the short term and thus equities may refrain from a sustainable rebound as long as coronavirus fears continue to take the center stage.