Archives of “Coronaviridae” tag

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Warning on the potential for a recession due to the coronavirus – a critical ‘cushion’

  
Analysis, Economy
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Stephen Roach warns on the potential for the coronavirus outbreak to shock the world in a recession

  • Historically, the rapid expansion of cross-border trade has been an important part of the global growth cushion that shields the world economy from all-too-frequent shocks. 
  • Now, however, reflecting the unusually sharp post-crisis slowdown in global trade growth, this cushion has shrunk dramatically, to just 13% over the 2010-19 period. With the world economy operating dangerously close to stall speed, the confluence of ever-present shocks and a sharply diminished trade cushion raises serious questions about financial markets’ increasingly optimistic view of global economic prospects.
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Who is Roach?
  • a senior fellow at Yale University’s Jackson Institute for Global Affairs
  • a senior lecturer at Yale School of Management
  • formerly chairman of Morgan Stanley Asia and chief economist at Morgan Stanley
Stephen Roach warns on the potential for the coronavirus outbreak to shock the world in a recession

OPEC said to be discussing extending output cuts until at least June

  
  Analysis
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OPEC is said to be alarmed by the coronavirus outbreak

OPEC

Reuters is reporting on the matter, citing three OPEC sources, in saying that the bloc aims to extend the current oil output cuts through to June at least.

Adding that members are also discussing on deepening the cuts if oil prices or demand should fall significantly on the coronavirus outbreak.
There is little doubt that the virus will weigh on oil demand in Q1 at the very least but if it does have a prolonged impact, OPEC may have to live with lower oil prices until the world adjusts to the situation in the long-term.
I mean, if they can’t even properly comply with current quotas – what more if they choose to deepen cuts further. It’d be all talk but no action.

What is your preferred source of safety from the Coronavirus?

  
  Analysis
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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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Coronavirus fears unlikely to turn the Fed into doves

  
Analysis, Economy
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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.

Asian stocks slide as coronavirus fears spook markets : Nikkei 225 closes lower by 2.03% at 23,343.51

  
Analysis, Global Indices
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Asian stocks slide as coronavirus fears spook markets

Nikkei 27-01

There’s still a high degree of uncertainty involving the new coronavirus outbreak situation and that is keeping markets very nervous to kick start the week.

Chinese markets may be closed but A50 futures are taking a beating – even down by over 5% earlier – as risk aversion continues to flow throughout markets.
US 10-year yields are down to their lowest level since October, 4.8 bps lower on the day at 1.635% as we look towards European trading. Meanwhile, the likes of the yen and gold are bid as safety flows are the name of the game to start the day.
USD/JPY sits at 109.05 currently while commodity currencies such as the aussie and kiwi are also being weighed lower, alongside the offshore Chinese yuan.

China imposes restrictions on travel to Beijing

  
  Analysis
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More signs of how serious Beijing is taking the epidemic

Bus travel corona virus
China reported 10 new coronavirus cases in Beijing today and there are now 51 cases in the city.
The latest restrictions prevent bus travel to Beijing from elsewhere. Private cars and trains are still allowed but passengers via those methods are more-often tracked.
As CNBC Beijing correspondent Eunice Yoon reports:

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Are Asian stocks due further falls post Lunar New year? Probably, yes.

  
  Analysis
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Coronavirus has a fear factor

According to a quick google search around 50,000+ people die from the flu each year. It is mainly the old or the already unwell who are most susceptible to the virus. In 2003 the total number of SARS death was 700+ from a total sample of 8000+ cases. Here is a quote from the World Health Organisation on a person’s chances of dieing from SARS during the outbreak if they caught the disease.

The likelihood of dying from SARS in a given area has been shown to depend on the profile of the cases, including the age group most affected and the presence of underlying disease. Based on data received by WHO to date, the case fatality ratio is estimated to be less than 1% in persons aged 24 years or younger, 6% in persons aged 25 to 44 years, 15% in persons aged 45 to 64 years, and greater than 50% in persons aged 65 years and older

So far, 17 people have died due to the Coronavirus and this is a concern. The total number of coronavirus cases is rising all the time and the fear factor alone should weigh on equity markets. People will not want to travel around if they can avoid it as the disease spreads. I was surprised that on January 22 the Asian markets closed higher, even though the case load doubled. The Jan 23 response made much more sense to me in the Asian markets as they fell sharply lower ahead of the Chinese New Year Holidays. Sadly, it now seems almost inevitable that we will have a sharp increase in cases over this travelling time.
Triple top in Nikkei 
Coronavirus has a fear factor

A triple top in the Nikkei makes an attractive level for shorts if and when the coronavirus fear factor takes hold. Furthermore, it is still too early for folks to fully grasp the implications of the disease and unknowns remain.

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