Kapadia Mihir Sun Global Investments

Markets Recover But Nerves Remain as Coronavirus Causes Shutdowns

“After yesterday’s huge declines in stocks (S&P 500 -7.3%) there is something of a slight recovery in the markets this morning with Oil prices and many Asian stock indices…….

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By Mihir Kapadia, the CEO of Sun Global Investments

higher but the markets overall will remain nervous as the spread of the Coronavirus continues to have great ramifications as Italy closes down the whole country and other countries in Europe and North America await the inevitable huge increase in the rate of infection .

Yesterday we saw huge declines in global stock markets  – The S&P 500 fell below 7% in the first four minutes of trading and a Circuit breaker was triggered to halt trading for 15 minutes. In terms of the S&P 500 sectors all were down by more than 4% with consumer staples down 4.41% while the worst were financials (- 10%) and Energy ( -20%).

US Treasury yields were the main safe haven with the whole yield curve falling below 1%. Currently the 10 year yield is at 0.64% (having been 0.35% at the low yesterday) and the 30 year yield is at 1.08%.

In overnight trading, most Asian Indices are up about 1% to 2% but nowhere near making up yesterday’s losses. European Stock index futures are up 1%-2% in early trading. Currently US Stock index Futures are up 2.4% to 3.0%.

However, given the uncertainties created by the Virus, the outlook is still negative for risk assets.”

Oil Prices Rebound from Thirty Year Lows

 “Oil prices have recovered following biggest slump in almost thirty years with today’s increases touching 7% although prospects of a considerable recovery look slim. Brent crude rose 6.9%, to $36.72 a barrel while U.S. WTI crude rallied 6%, to $33.00 a barrel.

Prices have stabilised following the shock of Saudi Arabia’s decision to launch a price war against Russia after the disintegration of recent talks to deepen production cuts. With prices low, this will likely mean that both parties will have to re-enter talks in order to prop the market back up and make it more profitable. Until that arises, limbo is expected in the oil markets.”

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