Steep Slide in Equities as Covid-19 Virus Spreads Beyond China in Unidentifiable Ways

February 24, 2020

Reported coronavirus cases and deaths jumped over the weekend in three disparate countries (South Korea, Italy and Iran). Not only are these place far apart in distance, but scientists have been in many instances unable to connect the exact source of exposure outside of China. It’s been difficult to separate fact from fiction as all sorts of alleged counts have been mentioned. Worldwide, the case number exceeds 75k, and deaths appear to be avove 2600.

Stock markets in Europe currently show losses today of 3.0% or more in most cases and 4.6% in Italy. Asian market declines were led by South Korea (3.9%), 2.5% in the Philippines, 2.0% in India, and 1.8% in Hong Kong. Japanese markets were closed in observance of Emperor Naruhito’s birthday.

Brazil is closed for the Carnival festival.

The flight to safety saw the price of gold climb 2.0% to more than $1,680 per ounce and 10-year sovereign debt yields drop 5 basis points in Germany, 4 bps in the U.K. and Italy, and 3 bps in Switzerland. West Texas Intermediate crude oil sank 3.9%, as Iran has been hit particularly hard by the virus.

The dollar remains well-bid, with overnight gains of 1.4% against the peso, 0.5% versus sterling, 0.4% relative to the Aussie dollar and kiwi, 0.3% vis-a-vis the euro and 0.2% against the loonie and Swiss franc. The yen bucked this pattern with a 0.2% upturn.

Another development over the weekend that’s being watched is Vermont Senator Sanders’ huge victory in Vermont where he capture almost 50% of support compared to¬† under 20% for each of his opponents. Since the Russians want Sanders to be the Democratic Party standard-bearer and their intelligence on U.S. political matters seems to be the best around, it’s fair to conclude that Trump’s reelection prospects are maximized in Sanders gets the nomination.

The February German business climate index compiled by the IFO Economic Institute edged 0.1 point higher to a 2-month high in February of 96.1, which would be consistent with first-quarter economic growth in Germany of 0.2%. Expectations also rose to a 2-month high, while current conditions dipped to a 2-month low. The subindex for manufacturing accounted for the improvement with an 8-month high. Subindices for services, trade, and construction were each lower in February than January. All in all, nevertheless, the coronavirus score impacted the February data less than analysts were expecting.

Consumer confidence in the Czech Republic dropped to a 65-month low in February, and business sentiment there was at a 6-year low. Czech PPI inflation more than doubled between November and January to a 7-month high of 2.4%.

Danish retail sales in January rose 0.5% on month and recorded the biggest on-year advance (2.7%) in a half year.

Turkish manufacturing sector confidence improved 2.8 index points in February to a 21-month high.

New Zealand retail sales volume rose 0.7% last quarter, but their year-on-year rate of increase slowed to 3.3% from 4.5% in the previous quarter.

Consumer prices in Singapore dipped 0.2% last month and matched December 7-month high with an on-year advance of 0.8%. However, core inflation was just 0.3%, a 4-year low. The 2019 current account surplus of Singapore was SGD 86.13 billion, just 0.4% smaller than in 2018.

Malaysia’s index of leading economic indicators posted a second straight decline in December and the largest drop in seven months.

Bank Indonesia, which had cut its key interest rate last Thursday, had to intervene today in foreign exchange markets to support its currency.

The Chicago Fed National Activity index rose 0.26 points to -0.25 but printed below zero for the fourth time in five months. Still ahead: release of the February Dallas Fed manufacturing index.

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

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