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Good morning. Stocks are plunging worldwide as the coronavirus outbreak sows chaos, investors are seeking havens from the storm, and Turkey is on the verge of a military confrontation with Russia in Syria. Here’s what’s moving markets.
Global stocks are on course for their worst week since the 2008 crisis, down more than 10% from this month’s peak, as investors price in the economic impact of the coronavirus outbreak. While Citigroup Inc. says markets aren’t yet in panic mode, the S&P 500 tumbled 4.4% Thursday as the U.S. racked up its fastest correction on record, losing a tenth of its value in just six days. Asian equities are also down 4% or more and European stock-index futures show no sign that the selling will let up. Investors are piling into Treasury bonds and other havens. Earnings growth globally will be zero this year, down from a previous forecast of 4%, Citgroup says, and the bank advises waiting for true panic mode to begin buying. Still, at least one investor says now’s the time.
Further unsettling investors, Turkey and Russia came to the brink of a direct armed confrontation in Syria after an airstrike killed at least 33 Turkish soldiers. The deaths prompted President Recep Tayyip Erdogan to turn to traditional allies in the West for military support. Defense Minister Hulusi Akar and top military commanders flew to an operation center on the Syrian border, signaling a major counter-offensive against Syrian forces, which are backed up by Russian warplanes. The UN called for an immediate cease-fire, warning that “the risk of even greater escalation grows by the hour.”
Keep an eye on OPEC. The potential impact of the virus outbreak has slammed the price of oil, with crude futures in New York down for six straight days and headed for their worst week since 2011. But there are signs that OPEC and its allies could be nearing agreement on action to stem the rout before meeting in Vienna next week. The group’s top official said the cartel and its allies are displaying a “renewed commitment” to reach an accord. Saudi Arabia has been pushing for deeper production cuts over the last few weeks, but Russia has taken a more cautious stance. Any move to prop up energy prices would be much appreciated by investors who own oil and gas stocks, the worst-performing sector in Europe in 2020.
A robust German economy would provide a strong bulwark for Europe as the coronavirus starts to have an impact, and officials in Berlin are looking at a range of measures to address the damage and protect its exports from a global slowdown. The government’s plans would seek to improve conditions for doing business, including reducing the tax burden on companies and boosting tax relief for digital investment, Economy Minister Peter Altmaier said Thursday. Earlier in the week, Bloomberg News reported that Finance Minister Olaf Scholz is considering a move that could open an avenue for limited fiscal stimulus in Europe’s largest economy, temporarily suspending the constitutional mechanism that restricts the country’s debt levels in order to provide relief for indebted regions. We’ll get a reading today on how Germany is faring when the government reports on the unemployment rate for February.
With all eyes riveted on the spread of the coronavirus, it’s just as well that the financial news calendar has thinned out a bit. Rolls-Royce Holdings Plc and British Airways owner International Consolidated Airlines Group SA are among the companies scheduled to announce earnings. BASF SE added to the growing industrial gloom by warning of a possible second annual profit drop due to the impact of the coronavirus and an ongoing automotive slump.
What We’ve Been Reading
This is what’s caught our eye over the past 24 hours.
- Even a mobility revolution can’t crack American car culture.
- Advisers to rich pitch equities, private markets after plunge.
- Europe’s biggest private-equity deal in a decade happened overnight.
- Branson’s wealth falls to Earth as Virgin Galactic sputters.
- Billionaire family feud revealed by bugging at Ritz Hotel.
- Johnson’s post-Brexit spending spree to end era of austerity.
- Printing’s not dead: The $35 billion fight over ink cartridges.
©2020 Bloomberg L.P.