While the Coronavirus will again be the major influence on sharemarkets – especially those in the US which seems to be at sea on coping with the crisis, as does Iran, Italy, and France – investors will be watching bond markets closely after last week’s record slide in yields to a series of new lows in the US and Australia.
In fact, the most stunning move in financial markets on Friday wasn’t the ups and downs in equity markets, it was the rapid early slide in government bonds yields to levels that would have been considered unthinkable just two weeks ago.
It was a flight to safety amid fears about economic growth and expectations for more monetary easing that saw bond yields plunge to new record lows in the US and Australia.
The yield on US 10 year bonds ended around 0.76% after hitting the all low of 0.695%. The Australian 10-year bond ended around 0.67%.
China’s head start of a month in dealing with the infection shows up in the better performance of its sharemarkets compared to those elsewhere
While Chinese shares made it back to their January high and surged 5% last week, US shares eked out a rise 0.6% which only came with Friday’s late rebound.
Eurozone shares though fell 3.1%, Japanese shares fell 1.9% and Australian shares fell 2.7%. Most of those losses came on Friday’s big sell-off.
Chinese shares are down by just under 3% from their pre-Lunar New Year holiday highs.
Some of that relative outperformance is due to the earlier appearance of the virus in China in January (it spread from that country) and the continuing belief that Chinese governments and the central bank will inject more stimulus to ease the obvious pain in the wider economy.
From their recent highs to recent lows US shares have now fallen 13%, Eurozone shares have lost 16%, Japanese shares are down 14% and Australian shares have lost 13%.
Commodity prices were mixed with oil plunging as Russia refused to support further OPEC production cuts, but gold and iron ore prices rose.
A weaker US dollar saw the $A rise and end around 66.58 US cents..
Friday saw the Dow end the day down 256.50 points or 1%, to 25,864.78, while the S&P 500 US lost 51.57 points, or 1.7%, to close at 2,972.37. The Nasdaq finished 162.98 points lower, or 1.9%, at 8,575.62.
The day before the Dow closed at 26,121.28, down 969.58 points, or 3.6%, while the S&P 500 lost 106.18 points, 3.4%, to close at 3,023.94. The Nasdaq fell 279.49 points, 3.1%, to close at 8,738.60.
For the week, the Dow turned positive to gain 1.8%, the S&P 500 added 0.6% and the Nasdaq rose 0.1%, following the sharp rally in late afternoon trade.
In Europe, stocks finished broadly lower. The FTSE 100 fell 3.6%, and the STOXX Europe 600 index closed 3.7% lower.
In Asia on Friday, the Shanghai Composite Index fell 1.2% and Tokyo’s Nikkei 225 lost 2.2%. The Kospi in Seoul lost 2.2%. China’s CSI 300 Index lost 1.6%.
