March 7, 2020
Dollar in the dumps
NFP on tap
Nikkei -2.72% Dax -2.49%
UST 10Y 0.77%
Europe and Asia:
USD NFP 8:30
CAD Employment 8:30
Markets were generally quiet but with a decidedly risk-off slant with equity futures down another -1.25% in morning European trade while the dollar remained in the dumps as 10-year yields hit their lowest rates on record.
The UST 10 year yield as was as low as 77 basis points indicating an almost universal rush to safety as investors begin to appreciate the global economic impact of the coronavirus. Globally the caseload has crossed the 100K mark and many experts fear that the US may be the next hotspot as travelers from Italy have brought the virus onshore to both East and West coasts.
While the absolute number of US cases is only in the hundreds at this time, experts expect that figure to explode given the fact the US has not tested any of its population for infection. More troubling still is the fact that in the case of Italy fully 10% of patients require ICU treatment suggesting that the coronavirus may have morphed into a more virulent strain. The very early US cases also show a greater than expected number of serious infections and if the new strain of coronavirus is indeed more powerful that will almost certainly bring much of US economic activity to a halt.
Against that backdrop, today’s NFPs are likely to carry little weight in the market as traders will view the data as stale. Indeed much of the risk in NFPs today is asymmetric. If the number is slightly better the market is likely to ignore it. If, however, the NFP misses its mark it would only add salt to the wound indicating that the US economy was already softening before the coronavirus and may now fall into a recession under the current strain. That, in turn, could push US yields even lower and will likely send USDJPY through a test of the 105.00 level.