COVID-19 Continues to Dominate World and Market News

February 25, 2020

Confirmed worldwide coronavirus infections and deaths now total 80,348 and 2707. 77,600 and 2663 of these are in China, but the disease continues to spread with Croatia and Austria reporting their initial instances, South Korea and Italy having 977 and 229 infections, and Iran’s deputy health minister becoming one of the casualties. The WHO warned that the disease could evolve into a full pandemic. Travel and trade has been disrupted, and Japanese officials by proclaiming now too early to talk about cancelling the Olympics due to open in 5 months in Tokyo only underscore how everyone is extrapolating the disease’s proliferation into the future.

Japan’s Nikkei-225 dived 3.3%. While some markets in Asia partly recovered (South Korea’s Kospi went up 1.2), other dropped further such as China (-0.6%), India (-0.2%) and Indonesia (-0.3%). Stock markets in Australia and New Zealand tumbled 1.6% and 0.9%. In Europe so far, equities are down 1.2% in Spain and and 0.6-0.8% in the U.K., Germany, France, Switzerland, and Italy.

The 10-year Treasury got as low as 1.36% — within four basis points of its all-time trough¬†of 1.32% in June 2016 — and is currently unchanged today at 1.38%. 10-year sovereign debt yields in Japan, Germany and Great Britain are down 5, 3, and 1 basis points.

The price of gold fell back 1.6%, and that of WTI oil is down by a further 0.3%.

The dollar is unchanged against the Swiss franc, Australian dollar and Canadian dollar, up 0.3% versus the kiwi, but off 0.3% versus sterling, 0.2% against the euro and yuan, and 0.1% relative to the yen. The dollar extended its appreciation against the currencies of several developing economies such as Turkey and South Africa.

German GDP last quarter was confirmed to have been unchanged on quarter and up just 0.3% on year (0.4% when adjusted for differences in the number of business days). Calendar year growth slowed to 0.6% in 2019 from 1.5% in 2018. Personal consumption stagnated in the quarter and investment in machinery and equipment plunged 2.0% on top of a drop of 1.4% in the third quarter of last year. Net foreign demand exerted a 0.6 percentage point drag on the quarterly GDP growth rate but was neutralized by a net positive contribution from inventories of equal size. Construction spending provided the strongest positive growth contribution, and government spending also increased.

French business sentiment printed in February at the same level as in January and December. Manufacturing and construction also stayed the same, while services edged marginally better.

Spanish producer prices fell 0.8% on year in January, their smallest year-on-year decline in six months. Icelandic PPI inflation of 1.3% in January represented a 4-month high.

Polish unemployment fell from 6.1% in January 2019 to 5.5% last month, and Finnish unemployment over the same period rose to 7.2% from 6.8%.

The CBI monthly survey of British distributive trades rose a point to a 10-month high of +1 in February. Such had bottomed at -49 last August.

Japan’s indies of leading and coincident economic indicators in December were both revised lower to 91.6 (a 2-month high nonetheless) and 94.1 (an 82-month low).

Japanese corporate service prices fell 0.3% in January, but their 12-month rate of increase, which got a huge boost from October’s sales tax hike, rose to 2.3% from 2.1%.

Hong Kong’s trade deficit of HKD 30.595 billion last month was three times wider than a year earlier, as exports (down 22.7%) recorded the biggest drop in a decade.

U.S. data getting released today include the Case Shiller and FHFA house price indices, the Conference Board’s consumer confidence index, and the Richmond Fed manufacturing index.

President Trump is requesting an allocation of $2.5 billion of federal money for the COVID-19 virus, which Speaker Pelosi characterized as insufficient. Democratic candidates for president hold another debate tonight.

Copyright 2020, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

 

 

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