From Marc to Market:
Overview: Equities plunged, and yields sank as the coronavirus threatens a global recession. The oil price war signaled by Saudi Arabia and Russia aggravates the desperate situation. Equities markets in the Asia Pacific region slumped 3-7%. The Shanghai Composite was fell 3%. The Nikkei was off by 5%, and Australia was hit among the hardest with a 7.3% loss. Europe's Dow Jones Stoxx 600 gapped lower and had not reached a bottom in the morning session, and is off nearly 5.7% as this is written. US indices are hitting their opening limits (5% for the S&P 500). Benchmark yields are collapsing. The US 10-year yield is off roughly 30 bp to below 0.50%. The 30-year yield is below 1%. The German 10-year is at a new record low around minus 85 bp, while the 10-year UK Gilt yield has been more than halved to below 10 bp. Peripheral European bonds continue to trade like risk assets, and the yields are rising with the 10-year Italian yield jumping more than 20 bp. The yen has soared and is up roughly 2.5% in late European morning turnover. The US dollar is mixed. It is firmer against the dollar-bloc currencies and the Norwegian krone. The greenback is stronger against most of the emerging market currencies, and the 5.9% loss of the Mexican peso stands out. The peso is seen as an oil play and a proxy for other emerging market currencies that are less liquid or accessible and is also a victim of unwindings of carry-trades. The Chinese yuan is off about 0.2% against the dollar. Gold had initially jumped above $1700 but has reversed lower toward $1657 before finding new bids. It is now little changed on the day (~$1674). After falling 10% before the weekend, April WTI is off another 21% today around $32.50 after trading as low as $27.35 a barrel....MUCH MORE
Asia Pacific
In the coming days, the Japanese government is likely to announce a new facility to lend money to small and medium-sized businesses that have been hit by the coronavirus crisis. Japan Finance Corp may be spearheading the effort. Note that in the final look at Q4 19 GDP, Japan reported its economy contracted at a 7.1% annualized rate rather than the 6.3% decline initially reported. Australia may unveil an A$10 bln (~$6.6 bln) aid package as soon as tomorrow.
In discussions of the global supply chains, the iPhone and autos capture imaginations, but the reliance on China (and India) for pharmaceuticals is extreme and under-appreciated. The US, for example, gets more than 90% of its antibiotics from China, according to authors Janardan Prasad Singh and Rosemary Gibson in China RX, and Hubei, the ground zero of the coronavirus, is one of the largest concentrations in the PRC. India accounts for about 20% of the world's generic drug supply and relies on China for almost 2/3 of the chemical compounds it needs to make them. The lockdown in Hubei is threatening the availability of some 450 drug ingredients. Indian companies were thought to have 2-3 months of inventory, according to reports. The lower end of the timeframe is being approached. India announced it is restricting the export of some drug ingredients....
Bend Over Here It Comes Again
