The WHO has now declared the Coronavirus a pandemic while Donald Trump has imposed a 30-day travel ban from Europe and placed restrictions on cargo. Trump’s speech sowed more confusion and the markets cast doubt over his ability to handle the fast worsening crisis. Trump further disappointed markets due to the lack of any further detail on his promised fiscal stimulus.
US equities got sold off aggressively with the S&P ending 4.89% down, the Nasdaq 4.70% down and the Dow 5.86% down. See the DOW chart for the past 6 months.
Dow futures are currently trading even lower while all Asian equity markets are heavily weaker this morning. The Hang Seng has officially entered bear market territory. The JSE All share closed 0.79% lower yesterday with Sasol having lost 72.66% in the last week.
The Pound has weakened to 1.2820 in the wake of the BOE’s 50 basis point rate cut yesterday. The Euro is at 1.1298 as markets await the ECB’s decision later today. The Dollar has lost ground to safe haven currencies like the YEN and Swissie overnight. Gold that is also seen as a safe haven in times of uncertainty is actually getting sold off, as there is a continuous hunt for cash to cover margin calls on leveraged positions. The volatility index is up at 53 this morning just highlighting the pickle the world is facing currently. US 10Y treasury yield is off their lows currently back around 0.80% form 0.66% a day or two ago.
The Rand is markedly weaker this morning along with all EM currencies as risk sentiment weighs on EM markets. Mexico and Russia’s currencies has been sold off even more than the ZAR as they are linked to the oil price. Looking at the graph one can see how much more has the Peso and Rubble has sold off vs the ZAR.
With the ongoing price war in the oil space and the uncertainty in global markets, crude oil has shed 5% this morning trading close at $31 a barrel. Locally, business confidence is at a 20 year low in South Africa as Coronavirus fears and power supply issues dampen sentiment. South Africa now has 13 confirmed virus cases and stage 4 load shedding is in place. The Rand is currently trading at R16.42 and a break above R16.50 could open up a move to R16.80. Markets remain very illiquid and volatile.