S&P 500, AUD/USD Drops as China Raises Coronavirus Threat Level

S&P 500, AUD Price Analysis & News

• US Equities Pull Off Best Levels from China Announcement
• China to Close Schools Immediately Amid Second Wave Risks
• US States (Florida) See Increase in Virus Cases.

Second Wave in China

Equity markets have taken a turn for the worse following reports that Beijing will raise the emergency report level from level three to level two. This comes after Chinese authorities reported over 100 cases in as many as 5 days, raising fears of a second wave emerging in China. In response, Beijing City Officials have advised citizens not to leave the city unless it is necessary, while also looking to close schools from Wednesday.

In reaction to the latest reports out of China, risk appetite soured with the S&P 500 dropping to 2.3% to intra-day lows of 3075, before bouncing back above 3100. Elsewhere, the Australian Dollar had been the hardest hit against the safe-haven Japanese Yen and US Dollar, given that the AUD is typically seen as a proxy indicator to Chinese sentiment.

Aside from China, this had also coincided with reports that several US states are also seeing a record rise in coronavirus cases, most notably Florida, which saw cases rise 3.6% vs. previous 7-day average of 2.5%, while Texas hospitalizations witness the biggest rise in 2-weeks.

Going forward, market participants will be placing a close attention to further developments overnight, particularly if China were to carry out further restrictive measures. As a reminder, a wider scale lockdown in China could place leave oil prices at risk from its lofty levels. On the US front, eyes will be on the continued tracking of daily rises in the US.

S&P 500 Price Chart: Intra-day Time Frame

Source: IG Charts

AUD/JPY Price Chart: Intra-day Timeframe

Source: IG Charts