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Daily Archives: 11th February 2020

11th February 2020

😷 A sharp intake of breath

MARKET CLOSE:
iTraxx Main

42.9bp, -0.6bp

iTraxx X-Over

210.5bp, -2.6bp

🇩🇪 10 Yr Bund

-0.39%, +2bp

iBoxx Corp IG

B+102bp, -0.5bp

iBoxx Corp HY

B+336bp, -7bp

🇺🇸 10 Yr US T-Bond

1.58%, +3bp

🇬🇧 FTSE 100

6382.41, (-0.64%)
🇩🇪 DAX

12487.36, (-0.45%)
🇺🇸 S&P 500

3122.87, (-0.28%)

Hoping for the best…

Markets are back to trading the headlines. Their inertia rarely seems to last too long. Any data which suggests that there is a slowdown in the spread of the virus and the market rallies – and rallies hard.

And so the markets have recovered after a period weakness to hit record highs again in the US, as the rate of infections slows. In some respects, investors in the US are almost completely ignoring the closure of China Inc, judging by the robustness of asset prices there – or just anticipating Fed action to limit any downside risks.

It is going to become apparent soon enough as to whether the spread of the coronavirus (now named Covid-19) is ultimately going to get under some kind of control – and the number of cases outside of China is contained. Or it is all going to go awry. It’s become very binary.

Those ominous warnings, about ‘sparking bigger fires’ and all that, from a hitherto cautious and perhaps vacillating WHO appears to be laying the ground for a ‘get out of jail for free’ card for the under-fire organisation. That is, we can expect the announcement of a Covid-19 pandemic imminently.

Markets, though, are not trading as though they are expecting the worst. That is, there is still a view that the authorities outside of China can contain the virus’ spread. Hence it would follow that the economic fall out will be contained and weakness confined to Q1 only.

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