Coronavirus Weakens Stock Market, Boosts Bonds

Stocks plummeted deeper on Thursday as oil prices fell, and US Treasuries reached highs. Fears of a global pandemic were rampant as the rapid spread of the coronavirus continued.

Global markets have slipped for six straight days, and this plunge erased more than $3.6 trillion in value.

S&P 500 e-mini futures slipped 1.4%. Meanwhile, Europe looks ready to slump, too, as the EuroSTOXX 50 falls 2.7%.

In the UK, the FTSE futures declined by 2.3%.

MSCI’s broadest index for Asia-Pacific shares ex-Japan shed 0.5%. For the week, the index is down more than 4%.

For one analyst, the market is pushing the US Federal Reserve to cut rates.

The yield on US Treasuries slipped to record levels. As a result, the bets on monetary easing have risen. Traders are turning to safe havens, such as the Treasury bond, to offset the adverse effects of the virus.

Coronavirus Cases Jump

Around 96% of the cases are in China. However, most of the new infections are coming from other countries.

There has been a jump in the number of cases in South Korea. The news came with a warning the virus may be spreading in California.

Over in Taiwan, officials raised the epidemic response level to the highest possible. Meanwhile, Japan’s Nikkei lost 2% to a four-month low. There were also concerns about the possible cancellation of the Tokyo Olympic Games.

Aside from that, reports said a Japanese tour guide tested positive for the virus for the second time. The event raised questions regarding the manner the pathogen spreads.

On the flipside, in China, containment efforts are showing signs they’re working. As a result, Chinese stocks rose.

Economic Damage

Analysts have also been revising higher the financial damage estimates of the virus.

JP Morgan expects Chinese GDP to shrink 3.9% this quarter. Capital Economics believes it will contract in 2020.

The dollar has previously risen to record levels amid the panic over the coronavirus. However, it stopped when bets for an interest rate reduction by the Fed increased.

A week ago, the bets were virtually zero. Now, markets are betting a roughly even chance of a Fed interest rate cut next month. By April, the markets believe a rate cut is imminent.

As a result, the China-sensitive Aussie dollar fell to an 11-year low, while the euro perked up.

The Aussie traded at $0.6550 while the euro rose through $1.09 for the first time in two weeks.

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