European shares end the session with sharp declines

German DAX -1.8%

The major European shares are ending the session with sharp declines. For the year, the major European indices are also in the red.  A look at the provisional closes are showing:

  • German DAX, -1.8%
  • France’s CAC, -2.0%
  • UK’s FTSE 100, -1.9%
  • Spain’s Ibex, -2.4%
  • Italy’s FTSE MIB, -1.4%
For the year, changes are all in the red led by a 7% decline in the UK FTSE 100.
  • German DAX, -3.4%
  • France’s CAC, -5%
  • UK’s FTSE, -7%
  • Spain’s Ibex, -3.1%
  • Italy’s FTSE MIB, -1.6%
In other markets as the European/London traders look to exit are showing:
  • Gold is still negative. It is trading down $10.80 or -0.65% at $1648.10. The spot price tried rebound and move higher on the fall in stocks, but seems to have sellers above. Recall that in yesterday’s trade, there was a large seller reported in the futures market which helped push the price lower in the New York afternoon session
  • WTI crude oil futures are following the risk off sentiment with the contract trading down -$0.89 or -1.7% at $50.54. The price is not far off the low at $50.37. The high reached $52.02
In the US stock market, the NASDAQ is leading the charge to the downside. It is currently down -100 points or -1.11% and 9116.
  • Dow -308 points or -1.11% at 27653
  • S&P index -34.5 points or -1.07% at 3191
  • Nasdaq down -100 points or -1.11% at 9116

More new coronavirus cases starting to emerge in Europe

Austria and Croatia confirms their first cases

The state of Tyrol in Austria has confirmed two positive cases of the new coronavirus, while Croatian prime minister Andrej Plenkovic confirms that the country also has its first case of the new coronavirus infection.

Meanwhile, Spain has also confirmed that it is testing hundreds of tourists in the Canary Islands after one new coronavirus case was identified – the case pertains to an Italian doctor staying in a hotel there, with the hotel now in lockdown mode.

China says to increase yuan re-lending, re-discount quota to support small, medium banks

China state council announces more measures to ease the impact from the coronavirus outbreak

  • To increase yuan re-lending, re-discount quota by ¥500 billion
  • Encourages banks to delay interest payment for eligible firms until 30 June
  • Encourages commercial banks to step up lending to small firms
  • Says that will push lending rates significantly lower
  • Says to lower interest rates for loans to small and agriculture businesses by 0.25%
  • To exempt VAT for small businesses in Hubei from March to end-May
Although a lot of major corporations in China may look to resume business/production already, smaller companies and businesses are the biggest losers in the virus outbreak saga.
It is going to take some time for China to go back to full capacity but the real issue will be trying to convince the general population and consumers to resume their normal day-to-day activities i.e. shopping, eating out, travelling, spending on outdoor activities etc.

German 10-year bond yields fall to fresh lows since October last year

10-year bund yields slip to -0.510%


Risk tones continue to keep softer in European morning trade, with equities gradually slipping and bond yields easing further on the session.
German 10-year bond yields are now at their lowest levels since early October while 10-year Treasury yields have eased to 1.355% from a high of 1.414% earlier today.
The tilt towards being risk-off can be considered mild relative to what we saw yesterday, so Wall Street will have a lot of tinkering and posturing to do in the session ahead.
Fears surrounding the global economy and the coronavirus outbreak are still casting a large shadow over the market today but it would be unwise to count out the dip buyers after the countless times they have bailed out the market.
Let’s see if they can pull another rabbit out of the hat once again later today.

Trump: The market had ‘one bad day’ yesterday

US president Donald Trump comments during his visit to India

  • The market will go up if he wins the election this year
  • The market will crash “like you have never seen before” if he loses the election
  • Says the US is spending a tremendous amount on coronavirus efforts
Given the twist in the market mood over the past two hours or so, it may be too early to say that the market won’t have another ‘bad day’ in trading today.
US futures may still be holding up (barely) for now, but I reckon things can quickly turn on its head if we start to see stocks dabble their feet in negative territory later today.

Germany Q4 final GDP 0.0% vs 0.0% q/q prelim

Latest data released by Destatis – 25 February 2020

  • GDP non-seasonally adjusted +0.3% vs +0.3% q/q prelim
  • GDP working day adjusted +0.4% vs +0.4% q/q prelim
Slight delay in the release by the source. The preliminary report can be found here.
No change to initial estimates as this just confirms that the German economy stagnated in the final quarter of last year. Private consumption also flat-lined with a 0.0% q/q reading (compared to +0.5% q/q in Q3) with capital investment falling by 0.2% q/q.

China NDRC says that regions deemed low risk should fully resume normal activities

Remarks by a Chinese NDRC official on the coronavirus outbreak situation

Also calls for those regions to end the current transport bans. As you see more remarks like these from Chinese authorities, expect businesses and production in the country to pick up in the coming days/weeks.

However, to change the general population and consumer mindset to resume their normal day-to-day activities, I reckon that is a different challenge altogether.
Again, with China starting to relax the recent precautionary measures, the worst-case scenario is that there could be a secondary outbreak that may follow in the near future.

OPEC’s Barkindo: We see global economy almost doubling by 2040

When you can’t talk up the near-term outlook, you try and play the long game

  • Says that the “thirst for energy will continue to grow”
Oil prices are faring slightly better on the day after the fall yesterday, with WTI up by nearly 1% to $51.90 currently. I would say it is still early days to call for a major bounce, not when there is still the risk of global growth being further hampered by the virus outbreak.
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