Viral Valentines.

Viral Valentines.

It’s Valentine’s Day, and, jumping immediately to a non sequitur, you’ll note that global stocks have fallen on five of the last six Fridays, thanks in no small part to traders’ aversion to holding risk into the weekend during the coronavirus outbreak.

That “strong bias” (as Bloomberg’s Garfield Reynolds put it) against staying long on Fridays was muted headed into the US session, as global stocks meandered after the latest data showed Thursday’s surge in virus cases due to the new reporting method in China was likely a one-off. Total cases rose “just” 5,090 on Friday. The death toll in China jumped another 121 to 1,380.

The number of new cases in Hubei was 4,823, down sharply from Thursday’s massive 14,840 jump when the province announced the new method for tabulating infections.

That should help stabilize risk sentiment. But, as ever, we’re far from out of the woods and we haven’t even begun to see the impact on the Chinese economy come through in the data.

“So far, even though a number of provinces have resumed production this week, there have been limited signs of activities returning to their normal levels”, SocGen’s Wei Yao said, before noting that “daily coal consumption of major electricity companies remained 42% lower compared to their levels in the same period last year”.


“[It’ll] be critical in the coming weeks… to watch if local governments can facilitate the full resumption of production whilst avoiding a wider outbreak with preventive measures [because] if not, the risk of a slowdown extending into 2Q is rising”, Wei went on to caution.

Meanwhile, the German economy stagnated in Q4, a slightly worse showing than expected. I’ll get to more on this later, but the bottom line is that the word’s fourth largest economy grew just 0.6% in 2019, and it’s wishful thinking to believe 2020 will be much better.

“In general, the German economy remains stuck between solid private consumption and a paralyzed manufacturing sector”, ING said, in an e-mailed note. “Even though there had been several one-offs, explaining the short-term weakness, the bigger picture of the German economy is clear: it has been in a de facto stagnation since the summer of 2018”.

The euro is, of course, languishing at its lowest levels since 2017. Options suggest sentiment is getting even more bearish in keeping with spot’s inexorable grind lower as the bloc’s flagging economy stokes bets that the knock-on effect from the virus will force the ECB into more easing.

Of course, that lends itself to a stronger dollar, which is a bitter pill to swallow for the Fed. Like other developed market central banks, Jerome Powell and co. are struggling to get inflation up to target.

The allure of US assets only exacerbates the problem by facilitating USD+ flows. And speaking of that, it’s back to “America first” in 2020, as US equities have outperformed their global counterparts in each week to start the new year.

That’s the longest such streak in more than a decade.


8 thoughts on “Viral Valentines.

  1. This. Is. Not. Good.

    “Initially, the basic reproductive number, R0, was estimated to be 2.2 to 2.7. Here we provide a new estimate of this quantity. We collected extensive individual case reports and estimated key epidemiology parameters, including the incubation period. Integrating these estimates and high-resolution real-time human travel and infection data with mathematical models, we estimated that the number of infected individuals during early epidemic double every 2.4 days, and the R0 value is likely to be between 4.7 and 6.6.”

      1. Hey now, H-man, I’m not the one uploading zombie pictures with my blog posts. This is real-time medical research from DARPA and Los Alamos labs. If you download the study and read it, you’ll note that if these updated estimates are correct, we will likely start seeing travel restrictions and social distancing measures implemented globally in the not-so-distant future. If that not relevant to markets than I don’t know what is. I mean, not that it matters, since the CB’s will just dump another few trillion into the monetary base.

        Btw, I would love to see some analysis on the potential impact of COVID-19 on China’s bad debt situation.

        1. I’m just kidding. I know it’s bad. I just feel like it’s incumbent upon me to try and provide some levity because the problem with social media right now is that things which are objectively bad (like this virus) are made out to be apocalyptic events, which paradoxically hurts the public because all of the propaganda actually serves to drown out legitimate studies like the one you cited (I haven’t read it, but I’ll take your word for it).

        2. But there some good news, too

          “U.S. health officials will monitor people with flu-like symptoms for the coronavirus in five cities, the Centers for Disease Control and Prevention said Friday.
          The five labs are in Los Angeles, San Francisco, Seattle, Chicago and New York City. Dr. Nancy Messonnier, director of the National Center for Immunization and Respiratory Diseases at the agency, said the CDC intends to add more cities in the coming weeks until the CDC has achieved “national surveillance.”

      2. By the way, about canned corn. I just check availability of simple disposable face masks in Walgreens – seems like they don’t have anything in stock. I don’t know, may be because all that stuff is manufactured in China and China currently use everything in house. May be there is another reason.
        But anyway, in the case of global pandemic it might happen that medical supply in the US is a way limited compared even to China. Especially cheap disposable stuff like masks, visors, full protection suits.

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