Posted Feb 26 2020 at 11:23 amUpdated Feb 26. 2020 at 3:08 p.m.
Towards a
fifth day of decline
? After having opened in strong decline, the European stock markets resumed just before the opening of Wall Street. Earlier this morning, the Parisian rating had briefly lost more than 2% by mid-morning, the CAC 40 falling to 5,526.14 points, a lowest since October 10, 2019.
The picture was more contrasted at the start of the afternoon, the CAC 40 and the Euro Stoxx 50 stabilizing at + 0.07% and +0.09%, the Spanish Ibex grapering + 0.56%, and the Italian MIB regaining 1.5%, while FTSE 100 (-0.32%) and Dax (-0.15%) reduced their losses.
“Markets of panic have taken hold after the WTO declared that the world was not ready to face the coronavirus”, writes John Plassard of Mirabeau Gestion. The epidemic that started in December in central China has already
reaches a peak
in this country, where it has made 2,715 deaths (more than 78,000 people infected) including 52 in the last 24 hours, the lowest balance in three weeks. On the other hand, it spreads quickly outside of this initial focus of infection.
Spreads
More than thirty states are now affected and the coronavirus is progressing in particular in Italy, Iran and South Korea, with more than 40 deaths. In Europe, Italy is the most affected country with more than 300 people infected and ten deaths. So far spared, Austria, Spain and Switzerland are also affected.
In France
, a 60-year-old person died on the night of Tuesday to Wednesday at the Parisian hospital of La Pitié-Salpêtrière, announced the director general of health, Jérôme Salomon. This victim is one of three new cases identified in France, where the death toll now stands at 17 people infected and two deaths.
US health officials – the Center for Disease Control and Prevention – have recommended that Americans begin to prepare for the spread of the coronavirus. Even if the immediate risk in the United States remains low, the overall situation suggests that a pandemic is likely. “It is no longer a question of whether, but when and how many people will be infected”, said Dr. Anne Schuchat, Deputy Director of the CDC.
Broken market resilience
In this context, investors who fear above all a break in supply chains which would put the world economy on hold, reduce their exposure to risky assets such as equities. “We have reduced our allocation to equities in anticipation of greater volatility and we believe this will likely continue. We also believe that short-term downside risks persist, as the market’s previous resilience now seems to be shattered ”, reports Esty Dwek, head of market strategy at Natixis Investment Managers Solutions.
Wall Street fell Tuesday for its fourth consecutive session. The Dow Jones yielded 3.15%, the S & P 500 3.03% and the Nasdaq 2.77%. This is the largest decline in four sessions of the major Wall Street indices since December 2018.
For some like Jim Paulsen of the Leuthold Group in Minneapolis, the epidemic served to “Catalyst” to a stock market correction that was probably already in the pipeline. “The most likely outcome,” he adds, “is that we are going to have a growth shock, mainly in China and for other entities directly linked to it, certainly particular companies like Apple.” But I think we will probably have recovered the essentials in the second and third quarter. “
American 10-year rate at its lowest at 1.30%
Fears surrounding the coronavirus epidemic are pushing investors towards safe havens and in particular US debt, which is leading to a sharp drop in bond yields. That of 10-year Treasuries evolves on Wednesday at 1.3471% after having touched a historic low at 1.3070% the previous day. The yield on US 30-year government bonds fell to 1.786%, again a historic low, before rising to 1.8267%.
In Europe, the ten-year German Bund yield sinks into negative territory, at -0.516%, the lowest in four months.
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