Coronavirus Impacts on Stock Markets and Gold

The stock market was hit hard last week as investors worried about the new coronavirus in China. But in the past, during the outbreak of SARS, Ebola, and other infectious diseases, including bird flu, the market’s performance ended 2019 with the best year ever, and the US stock market that started 2020 near its all-time high. Investors fear that the new coronavirus will be infected may be exaggerated.

Last Friday, the Dow Jones Industrial Average, the S & P 500 and the NASDAQ all ended the day and one week. As the US Centers for Disease Control and Prevention announced the first outbreak in Seattle on Tuesday and the second outbreak in Chicago on Thursday, investor concerns over the spread of the infection grew, leading to a major US stock index Friday. They also fell.

However, despite the unsettling but general jitters that the stock market is experiencing recently, the decline in last week’s stock index was not significant. And the market’s response to this new coronavirus may have been influenced by past history of epidemic outbreaks and rapid proliferation. According to Dow Jones’ data, after the first SARS outbreak in 2002-2003, the S & P 500 made 14.59% profits at the end of March 2003. Over the next 12 months, it rose 20.76 percent.

April gold prices closed at $ 1,603.60 on the New York Mercantile Exchange, up $ 17.20 (1.1%) from the previous trading day. Gold closed above $ 1,600 for the first time since March 2013.

Coronavirus continues to spread. The Chinese government announced on July 17 that 72,363 were infected and 1,868 were killed.

The news shows that the three major indexes of the New York market are falling at the same time.

“The market is under pressure and gold is considered a safe asset,” said David Ridge, director of Highridge Futures. “I’ve heard continued negative news about coronavirus and are concerned about its impact on the global economy.”

Bart Melek, director of TD Securities, said, “There are concerns that the coronavirus situation is worse than anticipated.”

The dollar, however, was bullish and limited the rise in gold.

The ICE dollar index, which represents the dollar’s value against the major six currencies, traded at 0.39 percent to 99.39.

Gold is traded in dollars, so if the dollar rises, the relative price attractiveness of gold decreases and demand decreases.

“Gold prices are pushing the dollar higher and rising,” said Commerzbank’s Casten Fricch strategist.

Goldseek.com chief executive, Peter Spinna, said, “Gold will surpass $ 1,600 and rise to $ 1,700 to $ 1,900 in the next few months.” Said.

The New York Stock Exchange paused this Thursday in its race towards new records and fell, with traders attentive to the effects of the coronavirus on the economy.

The main Wall Street index, the Dow Jones Industrial Average, dropped 0.44%, to 29,219.98 points. The Nasdaq – with a strong technological component – lost 0.67%, to 9,750.96, and the S&P 500 – where the 500 largest companies and the main reference of investors are listed – lost 0.38%, to 3,373.23, after reaching record levels on Wednesday.

“There was no specific information” to determine the leave that began part-time, said Art Hogan of National Holdings. It is a withdrawal “rather healthy after strong increases since October, he estimated.

The attention of the runners is focused on the spread of the epicenter coronavirus in China and its economic consequences, although the disease is currently progressing at a slower rate.

This Thursday, the vice president of the Federal Reserve (Fed, central bank), Richard Clarida, said that the fundamentals of the US economy are solid by 2020, but the impact of the new coronavirus epidemic could lead the agency to review its outlook if it was necessary.

Treasury prices rose on Apple’s warning that a new coronavirus infection would adversely affect earnings.

The dollar was mixed due to concerns over economic damage from the corona, while New York oil prices closed flat.

Apple’s warning that it would not be able to achieve its sales outlook with Corona 19 sparked concerns in the market.

Apple said it will not meet its sales guidance for the second quarter of January. Corona was cited as a result of slowing Chinese production and slowing demand.

Concerns about the economic impact of Corona were also reflected in the German indicators of Europe’s largest economy.

The European Economic Research Center , a German private economic research institute, announced in February that the economic expectation index was 8.7. It was well below the market forecast of 21.0, which Wall Street Journal compiled.

Akim Wormbach said, “The German economic sentiment has also fallen significantly in fear of the negative impact of coronaviruses on global trade.”.

According to the National Housing Construction Association  / Wells Fargo, the housing market index for February fell to 74, down slightly from 75 last month. Still high, but below market estimate 75.

The Empire State Index, released by the Federal Reserve Bank in February, rose from 4.8 last month to 12.9, exceeding market expectations.

Stock Market

On the New York Stock Exchange, the Dow Jones 30 Industrial Average closed at 29,232.19, down 165.89 points (0.56%) from the battlefield.

The Standard & Poor’s 500 Index ended 9.87 points (0.29%) at 3,370.29, but the tech-focused Nasdaq closed at 1.57 points (0.02%), 9,732.74.

Investors’ concerns rose as Wall Street CEO Apple identified how Corona could affect management.

While Apple’s share price dropped 1.8% on the same day, shares of major semiconductor companies that supply parts to Apple were sluggish. Ram Research shares fell more than 4%.

However, the Nasdaq index rebounded strongly as Apple shares, which fell more than 3% in the market, fell sharply in the latter half.

The Empire State Index, released by the Federal Reserve Bank in February, exceeded market expectations, but failed to boost investor sentiment.

By sector, financial stocks fell 0.89% and tech stocks fell 0.35%.

Communication rose 0.4 percent.

New York Stocks experts say the market may be unstable with Apple’s announcement, but it won’t prolong.

“We’re disappointing, but not surprising,” said Chris Casso, a researcher at Raymond James. “We still see the issue as temporary.”

“If Apple’s manufacturing companies restore their entire production capacity and the sales network returns to normal, we expect most production and demand to recover.”

According to the Chicago Mercantile Exchange Fedwatch, the FF rate futures market reflected a 10.0% chance of a rate cut at 25bp in March.

On the Chicago Option Exchange (CBOE), the Volatility Index (VIX) was 14.77, up 7.97 percent from the previous trading day.

Bond market

According to Marketwatch and Dow Jones-Trade Web, the 10-year Treasury yield on the New York bond market at 3 pm (or Eastern Time) was 1.555 percent, 3.2bp lower than the previous trading day.

Two-year Treasury yields, particularly sensitive to monetary policy, traded at 1.410%, down 1.4bp from the previous trading day.

The 30-year Treasury yield was 2.006%, down 3.7bp from the battlefield. It has been the lowest in the last two weeks and fell below the early 2% level.

The 10-year and 2-year gaps narrowed from 16.3bp to 14.5bp.

Treasury yields move inversely to prices.

The first signs that Corona 19 is actually undermining global supply chains have raised preference for safe assets, such as US Treasuries.

Apple said Corona will not meet its 2Q guidance.

Apple said in a statement that production could take longer than expected to return to normal levels.

Indeed, many Chinese workers stay home from work after the Chinese New Year. Because of this, many companies have not reached full production operation.

Although many workplaces in China have restarted since the last 10 days, local governments are still cautious about ordering plant closures.

Corona 19 confirmations and deaths have not stopped.

Risk sentiment generally contracted, with the European stock market and New York shares falling.

The 10-year Treasury yield was below three months, and signs of stagnation also emerged.

Despite the Corona  crisis, the February Empire State Index exceeded Wall Street expectations.

The housing market index was lower than expected, but the impact on the US Treasury market was not significant.

Raymond James’s Kevin Gideth bond strategist pointed out that “Apple’s announcement that it’s under guidance means that US companies are beginning to think that coronavirus can be more than a temporary obstacle to a very strong growth engine.”

“The gold price soared above $ 1,600 an ounce for the first time since 2013,” says Peter Cadilla, senior market strategist at Spartan Capital Securities. .

Eric Breger, foreign exchange strategy chief of the Foreign Exchange Bank of Canada, said, “There has been a growing appetite for traditionally safe assets such as US Treasuries and Gold.” Rang. ”

“There is some concern that the Corona 19 situation could be a bit worse than expected,” said Bard Melek, head of strategic strategy for TD Securities. “Central banks around the world are becoming more dove and the markets are beginning to reflect this in their prices.” “He said.

According to Yonhap Max (6411), at 4 pm (Eastern US time) on the day, the dollar fell 109.857 yen to the yen, down 0.067 yen (0.06%) from the full-length New York’s aftermarket price of 109.924 yen.

The euro moved to the dollar at $ 1.07949 per euro, down $ 0.00385 (0.36%) from the battlefield price of $ 1.08334.

The euro was 118.60 yen per euro, down 0.47 yen (0.39%) from the total length of 119.07 yen.

Reflecting the dollar value of the six major currencies, the dollar index was 99.408, up 0.24 percent from the battlefield.

Real currency damage began to emerge as Apple reported that it would not meet its guidance in the second quarter due to the Corona  impact.

The dollar weakened against the yen but generally rose.

The dollar index reached its highest level in four and a half months, hoping that the US economy would be more resilient than other countries.

The euro fell on weak German economic data.

The euro-dollar gave the psychological support of $ 1.08 for the first time since April 2014.

The euro-dollar exchange rate fell 3.7% this year, the worst in the last five years.

Following Germany’s sluggish manufacturing and GDP figures, corporate confidence fell sharply, adding to the pessimism of the eurozone economy.

The European Economic Research Center , a German private economic research institute, announced in February that the economic expectation index fell sharply from 26.7 last month to 8.7. Germany and the Eurozone are not free from concerns that they are more vulnerable to the economic shock of Corona.

As economic indicators slumped, the prospects of central banks’ monetary policy will remain more easing than expected.

The Reserve Bank of Australia raised its expectations for a rate cut and stressed the Australian dollar, saying in its first meeting this year that it is still ready to carry out additional monetary policy if necessary.

Meanwhile, the WHO did not declare an international health emergency on Thursday, but so far China has referred to the situation as an emergency. It is also worth noting that the new coronavirus crisis occurred at a time when China’s economy slowed down. According to GDP figures released last Friday, China’s economic growth was 6.1 percent last year, the lowest in the last three decades. Jay Bryson, analyst at Wells Fargo Securities, said in a Wednesday report.

During the Lunar New Year, the spread of the virus and its impact on the economy can be accelerated.

And so far, travel stocks have been hit hard. Priceline’s holding company Booking Holdings Inc. fell 2.6% last week. Expedia Group Inc. fell 1.6%, while TripAdvisor Inc. fell 2.2%. United Airlines Holdings Inc. fell 8.7%, Delta Air Lines Inc. fell 5.2% and American Airlines Group Inc. fell 4%, further hurting airlines overall It was great.

However, if the spread of viruses is limited, the impact on Asia and around the world is likely to be short-term as well. “If you look at the time of the outbreak of SARS as a guide, the impact of the new coronavirus on the economy will be temporary,” Bryson says. Experts stress that it is important not to generalize the consequences of past epidemics to the economy and the market, and to open up all possibilities. According to a 2006 report commissioned by Fidelity Investments and cited by Bloomberg News:

We cannot draw a fixed conclusion about the impact of the epidemic on stock market performance. The stock market reacts unpredictably. Nevertheless, incidents should not be investigated separately and should be reviewed in common with other market conditions.

 

Reviewer overview

Coronavirus Impact on Stock Market and Gold - /10

Summary

April gold prices closed at $ 1,603.60 on the New York Mercantile Exchange, up $ 17.20 (1.1%) from the previous trading day. Gold closed above $ 1,600 for the first time since March 2013.

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