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Daily Archives: 23rd January 2020

23rd January 2020

🗞️ Coronavirus’ unknown dimension

MARKET CLOSE:
iTraxx Main

44.7bp, +1.1bp

iTraxx X-Over

218bp, +5.8bp

🇩🇪 10 Yr Bund

-0.31%, -5bp

iBoxx Corp IG

B+102bp, unchanged

iBoxx Corp HY

B+345bp, +6bp

🇺🇸 10 Yr US T-Bond

1.72%, -5bp

🇬🇧 FTSE 100

7042.47, (+0.35%)
🇩🇪 DAX

12774.88, (-0.12%)
🇺🇸 S&P 500

3116.39, (+0.32%)

Anxiety rattles markets…

The rally and recent upbeat tone in the markets has come to a screeching halt due to the increasingly serious nature of the coronavirus’ spread is being felt. Markets are taking fright.

Hopefully it can eventually (and quickly) be contained. However, the unprecedented lockdown of the cities of Wuhan, Huanggang and Ezhou – with more added to that list by the day, and curtailing of other activities/travel and so on across China at this important lunar new year celebratory period, is going to have markets in a defensive mood.

There’s also going to be a big macroeconomic hit, and although the IMF recently downgraded its forecasts for global growth (pre-coronaviras), others are going to follow suit.

Risk markets recoiled on Thursday, after that big drop overnight in Chinese equities (-3.1%). Investors moved swiftly into defensive mode and the level of activity declined. So it was a case of equities in the red, rates sharply better bid and credit stable with primary lighter.

There were enough deals on the screens nevertheless, from high yield/more unusual borrowers. Telecoms duo Altice and United Group were the biggies, but we also had Ellaktor (tap) and Mowi alongside several financial borrowers.

The ECB’s first meeting of the year didn’t throw up any surprises and obviously would have contributed to the lower levels of market activity. Economic risks remain tilted to the downside according to the central bank – but ‘somewhat less pronounced’, although we think they will quite possibly reassess that in due course depending on how events unfold in China.

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