Broad-based de-risking is the new-found market's theme

Markets

More expansionary monetary policy is expected globally, although central banks cannot deaden the supply-side disruptions caused by the COVID-19 outbreak. On the demand side, the impact is negative but to an unquantifiable degree, apparently suggesting that some central banks may prefer to wait before cutting rates. But this could be a mistake as they can't possibly take the chance for this thing to get worse.

Whether markets view lower interest rates as the solution to weaker virus-impacted activity is another matter. And this is a significant concern as if Fed monetary policy can't paper over the cracks as a short-term fix; the global capital markets will be on a world of hurt

The wicked moved in US yields, with the 10y coat-tailing the 30y in plumbing new all-time lows over the past 12 hours, is foreshadowing a growth shock of the magnitude not seen before.

The S&P 500 is down ~8% since Feb 19 as the 'buy the dip' mentality has long left the playbook for US equities, which have historically been supported by a dovish Fed. 

Asia's equity markets are trending weaker, albeit in a more contained fashion than the selloff in US markets overnight probably due to the extraordinary focus on reverse Yankee mania with the virus arriving at the US markets doorstop

European Open

Europe is called down 1% with cyclical again expected to underperform while Airlines and staples also to be under pressure. Notably, the selling pressure in Europe the last few sessions has become selective as traders continue to hammer their sell button as broad-based de-risking is the new-found market theme.

Cleary, the risk from here is that we get further travel restrictions border closures and stay at home mandates as COVID-19 becomes a global pandemic with all the negative implications that would have on global growth.

EM Asia FX

EM Asia FX is trading mixed with investors who are reluctant to push USD/Asia forcefully higher ahead of the London open. The focus is very much on Korea, where COVID-19 cases now exceed 1,000 – a nearly 20-fold increase in the past week. The BoK is widely expected to cut its policy rate by 25bp tomorrow.

Olympics in Trouble?

Although I commented on this, it seems that just yesterday, there were stories circulating that a senior member of the International Olympic Committee said that if it proves too dangerous for Tokyo to host the Olympics this summer because of the coronavirus outbreak, organizers are more likely to cancel it than postpone. As people around the world go into lockdown, expect the news-flow to get worse from here as the fiendish virus and the knock-on effects spread.

Oil market

The market has grown weary of OPEC kicking the can down the road and, as expected,  investors let the API bounce fall through the cracks as traders remain hyper skittish and oil rallies short-lived as self first ask question later will be the theme if there is still even the slightest concern over the virus outbreak becoming a pandemic.