On Wednesday, WHO announced that the Coronavirus epidemic was a pandemic. What it means for the world and markets in particular. All forces will now be focused on fighting the infection. Countries are beginning to introduce quarantine. Borders, schools, universities, museums are being closed. For the economy, this is very sad news, because no one knows what it could lead to. Tourism is going down, trade turnover is going down, production is going down.
Chart of the day DAX
Markets are reacting to this situation ambiguously because they just don’t know where they’ll be better. The U.S. stimulus measures should correct the current situation and somehow determine the movement of exchanges for the near future. On Wednesday, after the statement of the WHO, markets started to decline again to the minimum values. S&P500 has been losing almost 5% since opening, DOW Jones is losing almost 6% and DAX closed 0.35% below opening.
Cryptocurrencies do not feel very well after the collapse of the global financial markets. As it turned out, Bitcoin didn’t turn out to be a “safe haven”, but on the contrary, it was included in risk assets. Since the beginning of the week Bitcoin has lost about 12% and is not going to change its direction. By the end of Wednesday Bitcoin is trading around $7770 for 1 BTC.
In Europe, everyone is waiting for the ECB meeting, which will be held on Thursday. Probably, some measures to stimulate the economy will be announced there. So far, the euro against the dollar feels normal. The Euro trades lower, losing no more than half a percent, but as we know, the volatility is always reduced before serious news and statements of central bank heads. Also on Wednesday, the leaders of the European Union and the head of the European Commission established a special fund to fight against coronavirus. The funds will be used to develop a vaccine and support medical institutions.
Oil cannot get off its knees in any way and is traded on Wednesday at $36 per barrel of Brent brand. OPEC has not yet taken any specific actions to stabilize prices, while the Arab Emirates decided to further increase production. Such actions only raise panic in the market. A trade war is starting, so it is unlikely that there will be any recovery in oil in the near future. We will follow the plans to save the economies of the USA and the European Union. Maybe they will prompt us to take further actions.
What’s waiting for us today?
11.00 Volume of industrial production in Europe for January
13.45 ECB meeting
14.30 ECB press conference
Important Notes on This Publication:
The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.