The failure by OPEC+ to strike a deal over production cuts saw Saudi Arabia take the drastic measure of dropping prices and ramping up production in essence starting a price war. The price of Brent has fallen to $32.20 (see graph below) which in turn caused stock markets to collapse, bond yields to plunge and violent currency moves. The fear surrounding Covid-19 is further compounding the panic in markets.
The US 10y yield is down at 0.53%, the 30y down at 0.985%, both having touched record lows earlier. Investors continue to flock to sovereign bonds in the pursuit of security. See the plunge of the 10Y yield in the graph below.
The Rand, which closed at 15.6598 on Friday has traded up near 16.9600 levels in illiquid markets this morning as panic set in and stop loss orders were triggered in Emerging Markets. The Rand has settled back to 16.2200 but is weaker against the Euro and Pound at 18.5150 and 21.1900 respectively. The Euro and Pound are strong this morning as the Dollar slips on the record fall in bond yields. The Euro has climbed to 1.1425 and the Pound to 1.3075 against the Dollar while the Yen is at 102.60. The ZAR is not the only emerging market currency under pressure. See below, Mexican Peso (green line) and Russian Ruble (blue Line) is under even more pressure as they are heavily linked to the oil market. The ZAR(orange) is sort of in between.
Wall Street closed down on Friday as the Coronavirus impact outweighed the good employment data. The S&P was down 1.71%, the Nasdaq 1.87% and the Dow 0.98% however US futures are heavily in the red this morning in the wake of the Saudi’s decision on Oil overnight. Asian equity markets have collapsed with the Nikkei down 5.75%, the Hang Seng down 3.73% and the Shanghai down 2.70%.
Gold is surprisingly trading at $1 668.00 after having traded above the $1 700.00 earlier today.
South Africa has its third confirmed Covid-19 case, the US now has confirmed cases in 30 states with the death toll now at 19 however, the number of new cases is declining in China.