Global Rout in Stocks Continues Amid Unrelenting COVID-19 Spread


Spain and Switzerland confirmed their first cases of infection on Tuesday as the COVID-19 continues to show up in new countries. The Swiss case involved a man who had been to Lombardy, Italy – the hotbed of Italian infections – mid-February. The Spanish case was the first on mainland Spain and involved a woman who had also been to Italy. In perhaps a sign that the spread in Iran is more than what officials are letting on, the Deputy Health Minister tested positive for the virus officially bringing the number of infections to 95 with 15 deaths. Tuesday saw 1,429 new cases of infection with only 508 being in China.


US stocks closed sharply lower on Tuesday as markets continued to reel from the recent surge in COVID-19 infections ex-China. With Chinese factories already struggling to open and South Korea potentially becoming another COVID-19 hot zone, technology companies could be particularly hit with Apple and Facebook already 10% down from January’s record highs. The DOW posted its worst two-day loss on record after a 3.15% plunge on Tuesday while the S&P and the NASDAQ shed 3.03% and 2.77% respectively. Yield on the 2Y USTs closed at 1.2269%, the lowest since April 2017, while 10Y USTs closed at a record low of 1.3554%.


British chancellor Rishi Sunak will delay significant decisions on taxes, borrowing and spending until autumn at the earliest amid growth forecast downgrades and the coronavirus outbreak. The Office for Budget Responsibility downgraded its economic forecast for the UK prompting Sunak to tell his team to focus on delivering election promises such as extra NHS spending and raising the threshold for paying national insurance. The Institute for Fiscal Studies commented projected that a balanced budget by 2023 will be difficult and does not leave much wiggle room for the chancellor ahead of the March 11 budget. The pound closed firmer at $1.3005 while yield on 10Y and 30Y UKTs closed lower at 0.519% and 0.962% respectively.


Asian markets continued their slide on Wednesday as the global selloff in stocks continued unabated. The ASX led the slide, down 2.31% while the CSI and the NIKKEI closed 0.83% and 0.79% lower. The HANG SENG also slid 0.73% lower with an announcement by the Finance Minister to award HKD10,000 to residents to cushion the effects of the virus on incomes doing little to stem the slip from an early low of -0.5%.


Turkey’s manufacturing capacity utility rates increased this month, partly reversing a slide the previous month. Turkish manufacturers used 76 percent of their capacity this month compared with 75.5 percent in January, the central bank said in a statement on Monday citing a monthly survey. The rate was 77.2 percent in November and 77 percent in December. The lira closed weaker at 6.1439 while TURKEY 47s were lower, trading in the mid 91s.


The Mexican economy contracted 0.1% in 2019, marking its worst performance in 10 years in President Manuel Obrador’s first full year in power. Q4 GDP slowed 0.14% compared to Q3 to cap a dismal year in which the economy shrank in 3 of the 4 quarters following data revisions. The data starkly contrasts election promises by Obrador that the economy would grow at an average 4% pa during his tenure although expectations are for a pickup in 2020 of about 1% according to estimates; the government however maintains a more optimistic 2% growth forecast. The best highlight from Obrador’s first year would be a decrease in social inequality with 37.3% of Mexicans earning below the nation’s basic food basket, a decade low. The peso closed about flat at 19.0788 to the dollar while MEX 50s were over a point lower, trading in the high 114s.


The ruble’s defiance to headwinds in the form of the coronavirus and slumping crude prices finally buckled after Russian markets reopened on Tuesday following Monday’s holiday. Having been steadied by inflows of foreign currency into OFZ auctions, the ruble closed over 2% weaker on Tuesday at 65.3761 to the dollar as coronavirus cases outside China grew. This marked the biggest daily slide for the currency in 10 months but analysts are however split on whether the rout will continue. RUSSIA 47s were also lower, trading in the low 134s.


Economists in a Bloomberg survey are not particularly optimistic about South Africa’s budget ahead of its delivery by Finance Minister Tito Mboweni on Wednesday. The median estimate in the survey points to a widening of the budget deficit to a decade-high in fiscal year 2020-21. Revenue undershooting targets and slow economic growth also means that Mboweni has little room to plug the deficit by either raising taxes or cutting spending according to the survey. With a previous GDP growth forecast of 1.2% by the Treasury being higher than the sub-1% IMF and World Bank forecasts, expectations are for a lower growth forecast in the budget. The rand closed weaker at 15.2148 to the dollar while SOAF 49s were lower, trading about at par.