By Lorcan Roche Kelly
Rush to safety
The rally in the safest sovereign bonds shows no signs of slowing this morning, with the yield on the 10-year Treasury briefly dropping below 0.7% and on the 30-year below 1.3%. Thank ferocious demand from asset managers across the world seeking to preserve capital in the face of coronavirus risk. In Europe, traders are moving to some of their favored crisis plays that will pay off should things get worse. Gold continues its strong run, up more than $100 an ounce this week.
Yesterday saw another plunge in U.S. markets and global stocks and futures point to more of the same in today’s session. Overnight the MSCI Asia Pacific Index dropped 1.8% while Japan’s Topix index closed 2.9% lower, capping its fourth straight week of losses as the yen surged. In Europe, the Stoxx 600 Index had slumped 3.8% by 5:45 a.m. Eastern Time with every industry sector falling more than 2.5%. S&P 500 futures pointed to more significant losses at the open.
The number of cases of the coronavirus is fast approaching 100,000, with more infections reported in the U.S., South Korea and Germany. President Donald Trump sought to calm fears over the outbreak saying that “it’s all going to work out” and that his administration is prepared for whatever happens. The world’s top infectious-disease specialists, meanwhile, seem less certain on how things will progress, with the WHO saying the virus has killed 3.4% of those infected. Some experts say it could spread to millions of people worldwide.
Yesterday’s OPEC agreement on reducing oil production by 1.5 million barrels a day could be dead-on-arrival at today’s meeting which Russia and other non-member allies are due to attend. Russia’s resistance to further output curbs could scupper the chances of any reduction, with Iranian Energy Minister Bijan Namdar Zanganeh saying that without Moscow “there will be no deal.” Crude extended its slide from its lowest close in more than two years as Brent for May settlement dropped below $48 a barrel and West Texas Intermediate’s April future traded under $44 a barrel.
Oh, and it’s jobs day
We’d normally lead with payrolls on the first Friday of the month as the key indicator for U.S. economic strength, but the intensifying fallout from the coronavirus means even that data will be viewed as stale by investors. For what it’s worth, economists expect 175,000 new positions added in February and unemployment to hold steady at 3.6% when the numbers are published at 8:30 a.m. Canada also reports jobs data at 8:30 a.m. Under the current circumstances, investors will be keen to hear from monetary policy makers, and there’s a full slate speaking today. They are: Chicago Fed President Charles Evans, Cleveland Fed President Loretta Mester, St. Louis Fed President James Bullard, New York Fed President John Williams, Boston Fed President Eric Rosengren and Kansas City Fed President Esther George.