Both growth-exposed and safe haven assets rallied in overnight trading as markets appeared to take an “each-way” bet on the impact of the newly discovered coronavirus. European shares rose again, and US indices set new records. However gold and bonds also lifted. The US dollar edged higher, but Asia Pacific futures markets point to opening falls in Tokyo and Hong Kong, indicating regional variation in response to the viral threat.

A key factor in the divergence could be US corporate reporting. More than 300 of the S&P 500 companies have unveiled quarterly statements, and both sales and earnings are ahead of estimates. Disappointment in resource stocks means overall earnings are flat, and this may come back to bite investors later. A preliminary report from the US Department of Labour that employment costs rose more than expected, and productivity gains were lower, sunk without a trace as investors cheered yet another high water mark.

The governor of the Reserve Bank of Australia will testify to parliament today. Traders anticipate further calls for the government to stimulate the economy. The implication is that the RBA has doubts about the efficacy of further easing of monetary policy, making interest rate cuts less likely. This scenario could see the Australian dollar higher today.

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