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Coronavirus Cases Jump, Markets Stall

What's New

. Asian stock markets shook today, as the number of new coronavirus cases and deaths in the outbreak's epicenter jumped sevenfold from the previous day, following the adoption of a new methodology, using computerized tomography for counting infections.

. It was not immediately clear why the death toll rose so sharply, and whether this is a one-off increase, but investors took it as dashing hopes that the virus' spread might be slowing. China's Hubei province, where the virus is believed to have originated, reported 242 new deaths, double the previous day's toll, and confirmed 14,840 new cases on Feb. 12. More than 1,300 people have died from the epidemic in China.

. Japan's Nikkei was flat while Australia's ASX/S&P 200 index moved down from a record high. The Shanghai Composite and Hong Kong's Hang Seng were also sending mixed results. On the other hand, safe-haven assets such as the yen, gold, and bonds rose.

. Rallying oil prices paused, with Brent crude still 15% below where it was before the coronavirus outbreak, despite the rise. Gold prices rose by 0.4%.

. In response to investor turn to safe haven assets, the Yen rose from a three-week low against the dollar, while the Yuan slipped against the dollar. The Aussie, widely used as a proxy for risk on Chinese assets, fell 0.22%, while the New Zealand dollar dipped 0.2%. Australia and New Zealand are highly exposed to China, as trade in commodities, tourism, and education is especially vulnerable to disruptions from the virus.

. On the other hand, the dollar traded at $1.0868 against the euro, close to its strongest level in more than two years, due to growing optimism about the health of the US economy but mostly versus a barrage of negative data releases for the European economies.

. The continued worries about the impact of the coronavirus has also had an impact on growth forecasts. Citi was another major player that downgraded its 2020 GDP forecast for China again yesterday, to 5.3% from 5.5% two weeks ago, and 5.8% in its January outlook. Morgan Stanley on the other hand believes that a gradual, rather than sharp recovery is the most likely scenario.


Up and Coming

. A data-light week continues, however, with an important CPI release in the US today. Inflation is forecast to have grown to 2.4% y/y in January, versus 2.3%y/y in December, underlining the US economy's domestic resilience. Jobless claims are also due today, forecast to have slightly increased since the previous week.



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