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Daily Archives: 25th February 2020

25th February 2020

😨 Pandemic of Fear

MARKET CLOSE:
iTraxx Main

50.3bp, +2.4bp

iTraxx X-Over

243.8bp, +11.3bp

🇩🇪 10 Yr Bund

-0.52%, -4bp

iBoxx Corp IG

B+109bp, +5bp

iBoxx Corp HY

B+363.5bp, +11bp

🇺🇸 10 Yr US T-Bond

1.31%, -6bp

🇬🇧 FTSE 100

6176.19, (+1.33%)
🇩🇪 DAX

12799.97, (+1.32%)
🇺🇸 S&P 500

3185.04, (+1.01%)

Closing off the world…

The high level of price volatility is a pure reflection of the fear and uncertainty plaguing the market. A case of ‘what if?’. After a bright start, the markets slumped and any early attempt to drag themselves off the floor proved short-lived.

And that brighter opening came even after German economic growth for Q4 showed an economy having stagnated, registering 0% for the period – and surely going to record something negative for Q1.

The resistance was futile as the coronavirus-yet-to-be-called-pandemic remained at the forefront of most minds amid growing concern of the increased cases across Europe. The financial markets’ Black Swan event? It’s back in view.

As if to highlight how difficult it has been and what we might look forward to, Hong Kong’s imports dropped by over 16% in January and exports declined by more than 22%. It was an eloquent demonstration of the devastating impact of the virus and how regional trade is being affected by the spread of it. The Chinese data is going to be awful for the month/quarter/half, just as it will be for all of Asia.

With more areas of Italy in lockdown, the Middle East feeling greater strains and the likelihood of further lockdowns across Western Europe, then a domino effect is in play which will see those economic activity numbers (output, productivity, growth) slashed for 2020, let alone the quarter.

Nevertheless, it’s quite clear that the markets want to go higher and any whiff of containment of the virus, they will recover much of the current losses, we believe. And that will be after taking into account the extended period of any hit to economic growth, corporate earnings and the readjustment of the corporate sectors’ investments as they possibly look to re-shore activities after decades encompassing a more globalised approach.

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