Futures rally to flat
Euro keeps the bid
Nikkei 0.79% Dax -1.37%
UST 10Y 1.366%
Oil $49/bbl
Gold $1648/oz
BTCUSD $9164

Europe and Asia:
No Data

North America:
USD New Home Sales 10:00

After a two day drubbing, risk assets tried to stabilize in early European trade today with US stock index futures turning green after spending most of the Asian session underwater.

Coronavirus news continued to dominate headlines as cases continued to rise in South Korea and Italy, but the news from China suggested that containment efforts may be working as cases outside of Hubei province decreased markedly.

There is no doubt that investors are watching the coronavirus headlines very carefully as the prospect of full-on pandemic continues to rattle the markets but with authorities across the globe now taking the threat seriously the bulls hope that the worst of infection could be contained and that the global caseload would crest within a few weeks.

Whether such a rosy outlook comes to pass remains to be seen, but the economic impact is already being felt by businesses large and small and clearly both the demand and supply hits will be serious.

For the financial markets, the real threat is that the defacto global quarantine on travel will last much longer than expected which could cause not only business problems but also the risk of insolvency for many affected firms. If that were to occur the present-day selloff would look mild in comparison as equities could quickly lose 30-40% of their value as forced liquidation flows create even greater downside pressure.

That’s an extreme scenario and G-10 central banks will no doubt stand ready to stem the worst of the credit fallout from the coronavirus impact, but it’s one the market is not even remotely pricing in.

For now, risk flows look to stage a short-covering rally into the New York open but if the bulls can’t sustain the bid into the close sentiment will get even more bearish as the week proceeds.