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How is Coronavirus impacting markets?

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After some incredible one-way gains through October to mid-January with central bank liquidity and a goldilocks economic data backdrop suppressing volatility, there was a general belief that very little could derail this thematic.

However, the coronavirus changed that, with concerns that supply chain disruptions, quarantining the public (in certain countries) and border closures will lead to lower global growth and a further deterioration in globalisation.

This lack of clarity and uncertainty has caused ripples through financial markets and volatility comes alive:

  • The Dow dropped 1031 points – the third biggest points fall ever recorded;
  • The S&P500 (US500) closed 3.4% lower – the biggest decline since February 2018;
  • The Italian MIB fell 5.4% – the largest fall since 24 June 2016 (-12.5%) and a 5 Z-score move;
  • Brent crude drops 3.8%, causing ripples in petro-currencies like the NOK and CAD;
  • Airline stocks, predictably, were smashed;
  • US 5-year Treasury fell a sizeable 12bp, with the 10-year Treasury (closing at 1.36%) eyeing a record low of 1.31%;
  • Gold trades to $1689 – the highest since February 2013;
  • The JPY re-establishes itself as the go-to safe-haven currency, rallying strongly against all major currencies;

And What Else?

South Korea raises virus level to “red” – forceful and strong measures to contain a further spread are now expected

South Korea consumer confidence falls the most in five years.

Another 30 countries outside of China have now seen cases of the virus, with fears mounting about an outbreak in the Middle East and Italy and the possibility of a threat to Germany.

Italy lockdown 50,000 people near the financial hub of Milan and close schools.

Austria are ready to implement border closures.

Apple detail they will miss Q2 sales guidance.

United Airlines withdraws 2020 forecasts.

Mastercard lowers revenue growth.

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