Huge stock market falls as Coronavirus spreadsCreated: 25th Feb 2020
Wow, what a sell off as the fears of the Coronavirus spreading take over. Worries about Italy, Libya, South Korea and the ability to transmit the virus undetected have escalated Apple’s supply chain concerns last week, and now as we write the Dow is down 800 points since Friday’s close. Jerry and Adrian discuss the news and the impact on the markets, and how it could all pan out. Adrian also reviews the major levels for the FTSE, DAX, Dow and S&P indices, and take a look at recent big moves on Gold and USDJPY, as investors move to RISK-OFF mode. And finally in defining trading, Adrian introduces Hedging to traders; how it all works and how traders can use it to manage risk to their portfolios during such times of market instability.
Global stock markets had a mixed week.
UK stock markets got a lift from better manufacturing data. Finishing flat on the week despite the falls Friday in the US.
And so, did the German DAX but much of the good work was undone by weaker data in the US.
US manufacturing PMI came in 50.8, worse than the 51.5 sand quite a bit than last month’s 51.9
Nevertheless, the number was still above 50 which indicates an expanding manufacturing sector……but only just.
So global stock markets closed on or close to their lows for the week.
US markets closing down about 1.5% across the board.
This week as we all know markets have skipped a beat. The headlines tell it all.
“Oil and Asian stocks fall on fears of global spread of coronavirus” ….
There was a feeling last week that markets were not pricing enough risk from the spread of the virus……….so here we are.
Far East markets were weak overnight with most registering losses of 2% to 3% with most emerging markets suffering even greater losses.
Other markets associated with such a risk off move have also suffered. Oil has fallen 3.5% wiping out all last week’s gains.
The reason being coronavirus or covid-19 to give its official new name. News that infections are accelerating outside China now.
North Korea is quarantining foreigners, South Korea has the largest number of confirmed infections outside China, with 763 cases =- previously it had 31.
And now Italy has hit the headlines with a significant outbreak.
They have 150 cases confirmed with more suspected cases. A huge jump from the previous week. The big concern for the Italians is that they don’t know where the infection is coming from.
The Italian state has put regions of Lombardy and Veneto in complete lock-down – not allowing anyone in or out.
The big risk for the markets now is that the spread of covid-19 is labelled a pandemic by WHO.
The big concern for health professional is understanding the transmission.
It seems possible now that individuals can be infected and pass on the virus without displaying any signs.
It then become incredibly difficult to control the spread if that is the case.
So why are shares down so much?
In a word FEAR.
Fear that it could paralyse business as countries weigh up how they can stop it spreading.
Travel, airlines, hospitality - hotels, oil, resources all been hit. And that involves a lot of companies.
Resource currencies, AUD, CAD and NZD all weaker this morning following on from last week’s drubbing.
News and events this week
Light calendar with little major releases in this last week in February
State holiday in japan, Emperor’s birthday, so mkts closed.
This mkt will have to play catch up tomorrow.
Trump in India – little interest for mkts tbh.
Germany IFO business climate. Broad based survey of manufacturers, builders, wholesalers, services, and retailers; number could come in weaker, especially following the poor ZEW number from Germany last Tuesday.
US CB consumer confidence another leading indicator. Survey taken before sell-off last week. Confidence remains high……for now. Depends if Covid-19 is impacting that confidence in any way.
CAD GDP data lacklustre
More quarterly US earnings – 44 companies from S&P500 – retailers in focus. Macy’s, Home Depot & Best Buy
US Democrat primaries – South Carolina on Saturday. Looks like Mr Sanders is now the front runner. Donald Trump will be rubbing his hands in anticipation at the upcoming election.