As odd as this might sound, the World Health Organization’s declaration of an international emergency turned into a risk-on catalyst Thursday.
If you watched the press conference, it was clear that Director-General Tedros Adhanom Ghebreyesus was keen on not sparking a panic or otherwise making a bad situation worse. And he succeeded – or at least as far as markets were concerned.
Equities aggressively pared losses to trade solidly positive into the close on Wall Street and 10-year yields, which at one point sank below 1.54%, ended near 1.59%. The 3-month, 10-year curve inverted earlier Thursday, in a potentially ominous development.
Some of the move in equities was probably down to hedging flows into the cash close, but WHO’s commentary around the robustness of China’s response to the outbreak and, perhaps more importantly, the organization’s contention that travel and trade flows need not be interrupted or restricted, helped buoy sentiment which had turned decidedly sour.
Big-cap tech has now logged three straight days of gains, recovering some of the losses from the Friday-Monday rout. Speaking of routs, Facebook had a horrible day.
After the bell, Amazon did its best to set the stage for a decent end to a rocky week for risk assets. Bezos turned in what, on a quick glance, looks like an across-the-board beat and decent guidance. AWS net sales were $9.95 billion, up +34% YoY, and ahead of expectations.
The after-hours spike in the shares took the market cap above the “magic” $1 trillion mark.
This ostensibly sets up a better session in Asia after Thursday’s dramatics.
With Amazon and Apple in the book with beats and US GDP having posted a skin-deep beat in the advance read (and market participants are apparently willing to accept it, despite the demonstrable slowdown in personal consumption and a third straight quarter of declining business investment), markets have cleared this week’s hurdles. The bond market is skeptical of Powell, but honestly that’s nothing new. He’ll figure it out. Or maybe he won’t.
It’s still all about virus headlines from here. The offshore yuan is back below 7.00 thanks to a late rally, and although things are sure to get worse in China in terms of the death toll and total number of illnesses, markets may be poised to start looking beyond this, even as the official “emergency” is only a few hours old.
Of course, a spike in the number of person-to-person cases in a major developed market and/or reports of deaths outside China could easily turn the tide back in favor of haven assets.
Draw your own conclusions. Oh, and if you plan on being around other humans (and certainly if you plan on buying any live snakes or vermin to eat), do yourself a favor and wear a mask.
Assuming you reside in a locale where they aren’t sold out, that is.