No Bottom In Sight – Markets Remain in a Freefall

Posted on

February 28, 2020
Equities continue lower
Stock down another 2%
Nikkei -3.67% Dax -4.37%
UST 10Y 1.17%
Oil $45/bbl
Gold $1627/oz
BTCUSD $8694

Europe and Asia:

North America:
USD PCE 08:30
USD PI/PS 8:30
CAD GDP 8:30
USD Chicago PMI 9:45
USD U of M

The markets were once again under tremendous pressure in Asian and Europen sessions as fears of further spread of coronavirus kept investors on edge with Nikkei down 3% and Dax down 4%.

Markets fear that prolonged quarantine and containment measures will cause irreversible damage to the global economy and as many analysts have noted such fears have caused the fastest correction in the markets ever with US stocks falling more than 10% in one week.

Certainly, the volatility has picked up markedly with SP futures moving in 20 point increments in a matter of minutes. If such price action persists for several more days it could create an avalanche of selling as retail investors who have been conditioned to buy the dip for the past ten years could begin to panic and try to lock in their long term gains.

With the coronavirus story now moved on from China to South Korea, Italy and beyond the markets are now ignoring the Chinese figures and focusing on the data in OECD countries which is believed to be much more credible. To that end, the exponential growth of cases in SK and Italy is what is causing the sharp selloffs today as the containment measures are not showing any results just yet. If those numbers begin to plateau over the weekend the markets are likely to bounce next week, but for now, the sentiment is tense.

On the economic front, the US sees PCE, Personal Income, Spending, and consumer sentiment data hit the tape with markets looking for very modest increases from the period prior. More interestingly will be the Chicago PMI numbers which were an early signal of a severe slowdown in manufacturing last month. The market expects a slight rebound to 45 from 42.9 the month prior, but if the data prints worse than expected it could trigger yet another wave of selling on fears that the manufacturing sector was already in recession prior to coronavirus onset and could now crater even further. Such bad news could send USDJPY hurtling towards 108.00 figure as the day proceeds.

Boris Schlossberg
Managing Director

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