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Get up to date on what's moving global markets this morning.
(Bloomberg) --
Markets brace for mayhem as the coronavirus continues to spread. Not even the Federal Reserve’s readiness to cut rates is likely to provide much solace, while China’s economy may contract more than expected in the first quarter. Here are some of the things people in markets are talking about today.
Traders around the globe bracing for another rough week got an early taste of quite how brutal it’s going to be again in markets after risk currencies plummeted in early trading. Any solace from the Federal Reserve saying it would act by cutting rates if the economic effects of the coronavirus warranted it could be fleeting. The offshore yuan sank and the Australian dollar plumbed fresh 11-year lows as investors ramped up bets for more monetary stimulus. The yen climbed and bonds yields in Australia and New Zealand sunk to fresh all-time lows as the recent clamor for haven assets showed no signs of letting up. Focus will be on the yuan, which retreated after data over the weekend showed activity contracted sharply last month. Asia equity futures are pointing lower. U.S. stocks pointed their worst week since the financial crisis on Friday. Treasuries surged, pushing yields on the 10- and 30-year notes to record lows. The number of cases in Italy jumped by more than 50%, while the U.S., Australia and Thailand reported their first fatalities. Read the latest updates on the virus here.
The Federal Reserve is now prepared to reduce interest rates this month even though it recognizes monetary policy cannot completely shelter a U.S. economy increasingly threatened by the coronavirus. Fed Chairman Jerome Powell opened the door to a rate-cut at the Fed’s March 17-18 meeting by issuing a rare statement Friday pledging to “act as appropriate” to support the economy. Traders and a string of Wall Street banks now expect the Fed to lower rates in the coming months, with some seeing the possibility of an emergency cut before the central bank’s March meeting.
For only the fourth time in almost 40 years, oil consumption may not grow at all in 2020, according to a growing minority of traders, investors and analysts. For OPEC, gathering in Vienna this week to discuss production policy, it’s a nightmare scenario likely to force the cartel into deep output cuts as the coronavirus crisis goes global, and with it, the impact on energy demand. In interviews at the annual International Petroleum Week, a major oil-industry gathering in London last week, the mood darkened as outbreaks from Italy to Iran forced traders to re-evaluate the virus’s impact on the global economy.
China’s economy could be heading for a worse-than-expected first-quarter contraction after the country’s manufacturing sector reported activity was at a record low in February due to the coronavirus outbreak. The manufacturing purchasing managers’ index plunged to 35.7 in February from 50 the previous month, according to data released by the National Bureau of Statistics on Saturday. Even before that data, the median forecast was that the economy would shrink in the three months through March from the last quarter of 2019, and the surprisingly weak data prompted further cuts to that view. Gross domestic product may now shrink by 2.5% in the first quarter from the previous period, Nomura economists said in a report on Saturday after the data release. Meanwhile, the pressure to get China back to work after the coronavirus shutdown is resurrecting an old temptation: Doctoring data so it shows senior officials what they want to see.
China’s cracking stock market recovery may soon face a real test: A flood of share sales and corporate-bond issuance as firms rush to make the most of favorable policies. The number of mainland-listed companies that announced plans in February to sell additional shares was the highest since April 2016 at 40, according to Bloomberg-compiled data. CICC analysts predict as many as 30% of firms may plan non-public stock sales the next year, which would exceed the level in 2015, when a stock bubble formed and burst. Meanwhile, the value of onshore corporate debt issued by Chinese borrowers last month more than doubled year-ago levels.
What we've been reading
This is what's caught our eye over the last 24 hours.
- Australia rate-cut pressure surges.
- Protests return to Hong Kong.
- Curbing travel is not the cure-all for the coronavirus.
- Just out of power, 94-year-old Mahathir plots Malaysia comeback.
- A manager who says he sold before the rout is now buying.
- How to prepare (rationally) for the coronavirus.
To contact the editor responsible for this story: Alyssa McDonald at amcdonald61@bloomberg.net
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