Fear Driving Markets As Coronavirus Spreads
February 25th, 2020
The market yesterday had a very strong sell off as the news of the spread of the coronavirus hit the news. The fear was back as the market worried about the spread impacting global economic growth. The DOW fell more than 1000 points in yesterday’s trading. The market is trying to show a little bounce to the upside this morning but nothing of significance yet.
These following remarks are from CNBC and are addressing the equities markets but the concerns that impact equities will have impact on the energy market as well. Again, from CNBC. “The second-largest economy in the world is completely shut down. People aren’t totally pricing that in,” said Larry Benedict, CEO of The Opportunistic Trader, adding a 10% to 15% correction in stocks maybe starting. He also said some parts of the market, particularly large-cap tech stocks, appear to be over-crowded. “It seems like there’s much more to come.”
“The market had been sanguine about the spread of the coronavirus,” said Quincy Krosby, chief market strategist at Prudential Financial. “The sanguine stance is being tested today.” “Companies are assessing their suppliers and their supply chains and seeing whether or not their revenue is going to slow,” Krosby said. “Because of that , this has become a sell-first, ask questions later type of market.”
The Trump administration has asked Congress for $2.5 billion to help battle the spread of the coronavirus, with $1 billion of that money dedicated to creating a vaccine.
US Treasury Secretary, Steven Mnuchin, said he does not expect the coronavirus outbreak to have a material impact on the Phase 1 US-China trade deal. Finance officials from the world’s 20 largest economies said on Sunday they would keep a close watch on the virus outbreak but stopped short of identifying it as downside risk to the global economy.
Saudi Aramco expects the coronavirus impact on oil demand to be short-lived and for consumption to increase in the second half of the year.
Goldman Sachs said commodity prices could fall sharply before Chinese stimulus to combat the coronavirus impact later this year helps the sector achieve its 12-month return forecast to about 10%. The bank forecast returns of -0.5%, 4.9% and 9.5% on commodities over the three-, six-, and 12-month horizon, respectively, on the S&P GSCI Commodity Index.
Bank of America expects Brent crude prices to average $62 per barrel in 2020, with medium-term downside risks due to slowing global growth.