Trade of the Day: Stocks collapse as virus infections near 100,000 around the world; yen, gold and US Treasuries rally.
Quote of the Day: “What began as a supply shock in China has morphed into something much more serious. The effects of financial market weakness and the disruption to daily life around the world will trigger lower consumer spending and investment on top of the disruptions to the global supply chain. We now expect global GDP growth to slow to 2.0% this year – its weakest since the global financial crisis and down from 2.6% in 2019 – before picking up to 3% in 2021. But a global pandemic would lead to a far bigger slowdown this year,” said Oxford Economics in a report published on Friday.
Stock of the day: Koolearn Technology rose as much as 5% in a falling market as investors bet schools will be shut for prolonged periods, allowing for companies in the online learning segment to prosper.
Number of the Day: $113 billion. The International Air Transport Association (IATA) said 2020 global revenue losses for the air passenger business could amount to as much as $113 billion as it assessed the financial impact of the coronavirus (Covid-19) public health emergency.
Tip of the Day: “We remain constructive on emerging market equities in the medium term, and forecast a compound growth of 7% to 9% in the long-term. Commodities and oil-related areas in the second half of 2020 will present very good buying opportunities as the Fed and China will continue to stimulate for the economy,” said Sean Taylor, Chief Investment Officer, APAC and Head of Emerging Markets at DWS, which manages 767 billion euros in assets.
Government bonds rallied to record levels as investors dumped risky assets like stocks. Sentiment was rattled by the long-term implications of a fast-spreading virus epidemic with the infection count nearing 100,000 worldwide. The yield on 30-year Treasury bonds has plunged 28 basis points, smashing the old record to fall to a new low of 1.28% from 1.56% and the benchmark 10-year bond fell 22 basis points to a new trough of 0.69%.
Earlier this week, the JPMorgan Global PMI, compiled by IHS Markit, fell by a record 6.1 points in February, down from 52.2 in January to 46.1, its lowest since the height of the global financial crisis in May 2009.
BofA Securities analysts said this was driven by a 24-point drop in the China composite PMI – new orders – on the back of the Chinese government's containment response to the Covid-19 outbreak.
“The sharp decline in the global PMI helps to explain the 10% fall in global equities, 80bps drop in US bond yields and the 6% underperformance of European cyclicals versus defensives since late January,” said BofA strategists in a report.
Stoxx Europe 600 fell to a new 2020 low, down 2.3% and S&P futures are down 2.9% as the market awaits the critical non-farm payrolls data for February.
“We forecast a 170k increase in non-farm payroll employment in February, a slight step down from the 225k pace in January. With a positive calendar bias, we forecast a 0.3% month-on-month increase in average hourly earnings in February, lowering the year-on-year rate 0.1pp to 3.0%. Finally, we think the unemployment rate will decline 0.1pp to 3.5% after barely inching up to 3.6% on a rounded basis in January's establishment survey,” said Nomura analysts in a note.
This followed a similar slump in Asia with the MSCI Asia Pacific ex-Japan index, Japan’s Nikkei 225 benchmark and the Australian S&P ASX 200 index. The Hong Kong Hang Seng index was down 2.32% as telecoms, property and banking sector stocks were hammered.