European markets had a mixed opening on Friday following an Asian trading session lacking a clear direction while US gauges point to modest declines at the opening. This uncertain market sentiment has several sources. First, investors are digesting poor German Industrial Production data for December which came in below expectations. In addition, rising concerns about the coronavirus hit investors’ sentiment after Japan has found 41 additional cases on the Yokohama cruise ship. And finally, some traders may be tempted to take some of yesterday’s profits prior to today’s US job report where a significant increase is already priced in. Despite these bearish factors, the risk-on mood remains robust this week as investors have become more and more optimistic about the impact of coronavirus on Chinese growth and sales.
However, a real downside risk to the market will be looming if the infection continues to spread past mid-February and further in Q2. For now, the Stoxx-600 Index is being led down mostly by miners and carmakers, while the DAX-30 in Frankfurt is the worst performer. The market consolidated close to its historical high slightly below the strong 13,600pts level. The first support is located over 13,515pts while the second one is close to the 21-period Exponential Moving Average, which is currently near the 23.6% Fibonacci retracement above 13,430pts.
