More than SARS

The death toll from the coronavirus outbreak reached 910, surpassing the number that died in the 2003 SARS episode. Globally the number of cases now exceeds 40,000. Hubei province in China, the center of the outbreak, is now in the third week of an almost complete shutdown with the economic fallout for global supply chains worsening. The obvious hit to economic growth in the country will have knock-on effects for China’s already stressed borrowers. With GDP possibly coming in a level lower than even the latest round of stress tests, regional banks could face a worse than worst-case scenario.

AKK out

The apparently settled question of who will replace Angela Merkel as German Chancellor was blown wide open again this morning when Annegret Kramp-Karrenbauer announced that she will step down as leader of the governing Christian Democratic Union. Her downfall was triggered when the CDU voted in a former East German region with the far-right AfD in the selection of a premier. With Merkel already making clear that her current fourth term will be her last, attention will turn to her other possible successors. Elsewhere in Europe, the Irish election saw a strong result for left-wing Sinn Fein with all parties falling far short of an overall majority, paving the way for a long and difficult road to forming a stable government.

Not happening

The much-touted emergency meeting of OPEC+ ministers to respond to the ongoing virus-spurred drop in demand from China seems unlikely to happen at all. Russia has been resisting Saudi Arabian efforts to reduce production and seems to have rejected a proposal from OPEC technocrats to cut output by 600,000 barrels a day. A barrel of West Texas Intermediate for March delivery was trading at $50.02 at 5:45 a.m. Eastern Time.

Markets slip

Global equities are showing signs of nerves at the start of the week with gauges slipping this morning. The MSCI Asia Pacific Index dropped 0.5% overnight, while Japan’s Topix index closed 0.7% lower. In Europe, the Stoxx 600 Index was down only 0.1% by 5:45 a.m. with energy stocks the hardest hit. S&P 500 futures point to little change at the open, the 10-year Treasury yield was at 1.573% and gold was slightly higher.

Coming up…

There is no economic data of note today. Fed Governor Michelle Bowman, San Francisco Fed President Mary Daly and Philadelphia Fed President Patrick Harker speak at various events later. President Donald Trump will publish his budget proposals which are expected to include funding for a mission to Mars and bring steep cuts to social programs. Democratic presidential hopefuls have their last day of campaigning ahead of tomorrow’s New Hampshire primary. Allergan Plc is among the companies announcing earnings.