Hello and welcome to our continued coverage of the global economy, financial markets, the eurozone and business.
Asian shares fell further, with the coronavirus epidemic showing no signs of slowing in Europe or the United States.
JapanThe Topix index fell 2.9% and the Nikkei 225 lost 2.7%. the Shanghai Stock Exchange the index fell 1.2% and the CSI 300, which also tracks Shenzhen stocks, lost 1.6%. Australian stocks on the ASX 200 lost 2.8% and the Hang Seng index lost 2.4%.
“No signs of stabilizing risk appetite, as reports of new coronavirus cases have spread across Europe and North America, causing further event cancellations and profit warnings,” said Ian Williams, economic and strategic research analyst Peel hunt.
It came after US stocks plummeted last night – something that will surely be remembered as one of the most tumultuous weeks in the stock market.
Where does all this money go? the bond market. Investors are betting that the US Federal Reserve will intervene with more stimulus – after their previous emergency cut.
The yield on 10-year US treasury Bonds, the benchmark for global bond demand, have widened new depths during the epidemic – far beyond the financial crisis or market turmoil that followed the election of Donald Trump as President United States.
Yields move inversely relative to prices, so the sharp decline indicates a global flight to security from investors. Here is a graph, the 10-year performance of the United States over two decades that illustrates this incredible race:
A few days ago, the idea that treasury bill yields fell below 1% surprised many investors. Today it has reached 0.808%. German Bank macro strategist Jim Reid said:
For bonds […] it’s just a drop in yields right now.
Asset allocation specialists at Societe Generale – people who make exactly that kind of decision on what to buy on a daily basis – suggest that treasury bills do offer the best protection. But they also add that further losses may be limited, and breeding exposure to Chinese stocks:
Policy makers have clearly entered the race, which should prevent – for now – an extension of the bear market for risky assets.
The containment of new cases has been impressive in mainland China, and we now expect a V-shaped recovery from the second quarter.
Agenda
- 8:30 GMT: UK housing prices in Halifax (February)
- 1.30 p.m .: GMT: American non-agricultural payroll (February)
