Capital Markets Remain Fragile After Yesterday's Bloodletting

Overview:  Yesterday's bloodletting in global equities has calmed, but investors remain on edge. Despite all the concerns that the markets were under-appreciating the implications of the new coronavirus, there is a sense that yesterday's moves were in excess. Japanese markets, which were closed on Monday, played catch-up today, and the Nikkei shed 3.3%. Australia's market fell another 1.6% today after a 2.2% slide yesterday, but many of the other regional markets stabilized, including South Korea, Hong Kong, and Singapore. Financials and consumer discretionary are have sent Europe's Dow Jones Stoxx 600 through yesterday's lows. US stocks are trading slightly firmer but off their best levels. Bond markets are also stabilizing with most benchmark yields little changed, though here too, Japan is playing some catch-up, and the 10-year yield is off four basis points to minus 10 bp. The 10-year German Bund is near minus 50 bp, while the 10-year US Treasury yield is near 1.36%. The dollar is trading with a firmer bias against most of the major currencies. Sterling, the yen, and Swiss franc are edging higher. Emerging market currencies are mixed. The South Korean won is rebounding to recoup most of yesterday's loss. Russia, which was also on holiday yesterday, sees the rouble lead on the downside with a little more than a 2% loss. Oil is little changed today after the light sweet crude for April delivery tumbled 3.65% yesterday. It is confined to a roughly $51-$52 range so far today. Gold' s five-day rally is at risk. It closed yesterday's gap and fell to near $1633 after poking through $1689 yesterday.  

Asia Pacific

China's clinical trials for Gilead's drug, which the World Health Organization officials have suggested may be an effective treatment, are underway (~760 people in Wuhan), and the results of the remdesivir drug will be reported in two months. Meanwhile, Moderna is reportedly shipping its first vaccine to US government researchers to study. In Tokyo, Fujifilm shares rallied as the Japanese government praised Avigan tablets as a potential treatment. Separately, Apple reportedly is re-opening half of its stores in China. On the other hand, Hong Kong is extending its school shutdown until mid-April.  

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Read more by Marc on his site Marc to Market.

Disclaimer: Opinions expressed are solely of the author’s, based on current ...

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