What is your preferred source of safety from the Coronavirus?

Via Bloomberg, question of the day ?

Via Bloomberg, question of the day ? 
This was a question on Bloomberg Market’s Live blog this week and I thought I would ask our Forexlive readership the same question. What are you looking at for safety in the current concerns over the coronavirus?
  • Treasuries: One of the first ‘go to places’.
  • Gold: Another quick go to place for value. Short term it makes sense for a quick spike, but longer term the improving US outlook means that gains should be capped
  • Bitcoin: Sometimes mirrors gold as a digital ‘gold’, but for some investors the jury is still out whether bitcoin is here to stay or a first flush of a changing digital age that may or may not be here. For me, when investing in a safe haven on the coronavirus fears, I would favour gold over bitcoin every time. Is that just an unfair bias and unnecessary conservatism, or sensible? Anyone take the other view?
  • Tech stocks: Seen as less vulnerable as industrials, finance or energy stocks. Perhaps long health stocks?
Other areas to look at?

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China said to urge its citizens to delay foreign travel over virus fears

AFP reports

From the headline, it doesn’t appear to be a hard rule but more of a travel advisory – along the lines of asking travelers to reconsider their plans. These travel warnings have always been a bit of a blur line and in my view, I don’t ever see them having much impact.

But if we do see a significant drop in Chinese travelers around the world, expect that to weigh on global economic conditions even more to start the year – especially in economies that rely heavily on tourism and services.

Coronavirus: British nationals returning from Wuhan to be quarantined for two weeks

All 1,500 people who have flown in from Wuhan since mid-January will be asked to remain in isolation for at least a fortnight reports the UK Telegraph (link may be gated)

Wuhexit?
Health officials are now attempting to track cases to make sure they stay in their homes
  • But it is understood that they only have contact details for one in 10 cases who arrived on such flights.
Another 200 British nationals stranded in Wuhan.
All 1,500 people who have flown in from Wuhan since mid-January will be asked to remain in isolation for at least a fortnight reports the UK Telegraph (link may be gated) 

Coronavirus – confirmed cases across the world now 4,295. Death toll at 106.

4,295 confirmed cases

  • 106 fatalities
  • 855+ in serious/critical condition
  • 15 countries reporting cases
Here is the progression:

  • Jan 17: 41
  • Jan 19: 62
  • Jan 20: 201
  • Jan 21: 291
  • Jan 22: 440
  • Jan 24: 830
  • Jan 25: 1,287

“Global standard” gauge of currency misalignment has GBP 22% undervalued against the USD

Here’s a bit of (useful) fun, The Economist’s “Big Mac index” to gauge whether currencies are at their “correct” level against the US dollar.

Its based on the currency valuation model of purchasing-power parity (PPP), i.e. that “in the long run exchange rates should move towards the rate that would equalise the prices of an identical basket of goods and services (in this case, a burger) in any two countries”.Says the magazine (link here, may be gated(

  • Burgernomics was never intended as a precise gauge of currency misalignment, merely a tool to make exchange-rate theory more digestible. Yet the Big Mac index has become a global standard, included in several economic textbooks and the subject of dozens of academic studies. 

Some of the results (more at that link)

The Economist's "Big Mac index" currencies US dollar

How coronavirus will impact oil markets – OPEC considering production cuts

The terrible human toll continues to increase.

Taking a look at oil though, this via Platts (S&P Global Platts is an energy and commodities information house).
Latest (in brief):
  • forecasting a drop of 200,000 b/d in oil demand for the next two to three months, reflecting roughly 15% of the expected oil demand growth in 2020
  • If the coronavirus is as bad as the Sudden Acute Respiratory Syndrome (SARS) outbreak in 2003, oil demand could fall by 700,000-800,000 b/d, reflecting more than half of the expected demand growth for 2020
  • OPEC members are considering deeper production cuts, or extending their existing deal, in response to a slump in oil prices, according to a source in the group.”The next two weeks are very critical for not only the oil market but the global economy,” the OPEC source said Monday, speaking on condition of anonymity.
Bolding above is mine.
oil markets - OPEC said to be considering production cuts

Coronavirus fears unlikely to turn the Fed into doves

The view from TD is that forecasting the extent of coronavirus contagion to the global economy or ‘risk’ is difficult.

But:
  • “we don’t expect the Fed to go more dovish simply because the market has become more nervous”
  • yield on the 10 yr is significantly lower since the start of the year
  •  “We don’t think the Fed is going to be a catalyst for a continued move lower in Treasury yields” 
However, the Fed will keep an eye on developments re the virus, on market sentiment and potential cascade for risk-off.
They’ll also keep an eye on what this guy wants, right?
The view from TD is that forecasting the extent of coronavirus contagion to the global economy or 'risk' is difficult.