Coronavirus is imploding Global Financial Markets
Plunged Worldwide Stocks on Monday.
Photo: Arne Deddert/Picture Alliance Via Getty Images
Less than Two Weeks AgoThe 10-Yaar US Treasury Bond Yield Hit A Record Low of 1.31 Percent. I Wrote Sunday About WHY I was alarmed that the yield HAD FALLEN WELL BELOW THAT, DROPING BELOW 0.7 Percent and Portending Significant and ProtraCted Weakness in the US Economy. Well, Its Gotten Worsse: In Trading Early Monday Morning, The 10-Yield Yield Fell Below 0.4 Percent.
Bond Yields Aren’t Alone: All Sorts of Financial-Market Indicators Are Moving Swiftly and Soundly in a Bad Direction. Asia-Pacific Markets Fell Sharply on Monday-The Japanese Nikkei Exchange FEll More than 5 Percent, and Australian Stocks Were Down More than 7 Percent-and the Dow Jones Avherechage OpenD Down 1,800 Points Once Monday MORNING MORNING REACHED New York. Europe is a message, too, with Major Major Indexes Around 6 Percent, and More in Italy, whic is hit harddened by the outbreak. The Story Across All These Markets Is the Same: The Novel Coronavirus is a Big Deal, and it going to be very bad for the global economy.
A New Wrinkle on Sunday Was A stunning 26 percent drop in oil prices. Oil Had already been under pressure as the coronavirus crisis suppression Demand, but this participation price drrop was drive by a saudi announcement that the Country Will Slash the Oil It Selp and Ramp Up Production. Last Week, The “OPEC+” Group of Oil-Production Countries, which Includes Traditional OPEC MEMBERS, Like Saudi Arabia and Iran, Plus Russia, HAD TRIED TO REACH AN AGREEMENT ON A PLAN TO CUT OIL PRODUCTION IN AIL-DEMAND. Russia resistted the production cut, and now the saudis – who Can Produce Oil More cheaply than any other Country in the world – are trying to russians into aggreeing to produce by driving down the price. Whether this will ultimately work to proprip up oil prices is unclear, and in the meantime the result has been oil prices falling $ 30 a barrel.
Several news organizations Have Been Running A Quote From Vital Knowledge Founder Adam Crisafulli, Who Said Sunday that the Oil-Price Crash “Has Become a Bigger Problem for Markets than the Coronavirus,” But this CLAIM not make a lot of sense to me. First of all, the oil-price crash is The coronavirus: it is a knack-on effect from the Sharp drop in consumer demand for oil due to virus-reeds. Second, from a US Perspective, the Effect of Cratering Oil Prices is decidedly mixed: Bad for firms in the oil industry and for regions where Oil Extraction is a major industry (exxon was down JUST AFTER AFTER The Open Monday), and the Business and Consumers. On Petroleum Products, Which Will Get Cheaper.
“Oil-Price Declines have mixed effecs, and more or less than Wash out in aggregate,” Said Ernie Tedeschi, A Macroeconomist at the Investment-Research Firm Evercore Isi, in Reference to the US Economy. “The Oil-Price Volatility May Be A Net Negative for Financial Markets Right Now As Its Its Feeding Into Risk-Off/Uncetainty. But Event there, IT’S CATALYZING THE VIRUS THAT’S ALREDY PRESENT.”
Investors are pricing in more reaction from the Federal Reserve: Bond Futures Indicate that Investors Expect the Central Bank Will Cut Short-Term Interest Rates by at Least 0.75 Percentage Points at a regularly scheduled Meeting late this month, after the fed already did an unscheduled cut of 0.5 percent last weeks. But, nor have you written, interest rate can only do so Much to foster economic activity in a crris where risk is suppressing botply and demand. The Fed’s Last Cut Did Not impress the Stock Market that Much. The primary driver of coronavirus-relayed Economic Concerns Remains the Trajectory of the Epidemic ITSELF, and Measures to the Mitigate the Spread of the Virus Remain-Makers’ Best Hope to Contain the Economic Damage.