‘Under Control’? Markets Wary As Virus Cases Rise, Hong Kong Exports Plunge, Japan Dives

Markets might be predisposed to stabilizing on the heels of what could very fairly be described as a “Black Monday“, but news flow will make it difficult.

For instance, Turkish stocks abruptly reversed an advance after a Turkish Airlines flight from Tehran bound for Istanbul made an unscheduled landing in Ankara on worries that some passengers might have contracted COVID-19.

Iran has 95 cases thus far and 15 deaths. “On Monday morning, a lawmaker from Qom said up to 50 people were dead, a number swiftly denied by the health ministry and other officials”, Bloomberg writes, before dryly noting that the denial “didn’t stop other parliamentarians from disinfecting his chair in the chamber”. South Korea’s infection total is now 970. In Italy, there are 270 cases.

Travel restrictions are becoming increasingly common and sporadic cases are popping up across the Mideast. Chinese cities are cracking down on arrivals from Japan and South Korea, for example, and Bahrain and Kuwait both reported new infections. The UAE – which previously banned travel to everywhere in China other than Beijing – barred travel to Iran. Kuwait stopped flights to South Korea and Italy on Monday.

On the economic front, Hong Kong posted a stunning 22.7% drop in exports in January. It was the largest contraction in shipments since 2009 and comes after exports rose in December for the first time in 13 months.

Imports fell a 14th straight month. “Despite some easing in US-Mainland trade tensions, the global economic recovery is still fragile”, Hong Kong’s government remarked, calling the coronavirus a “particular concern… which will heavily weigh on regional production and trading activities”.

“Hong Kong’s merchandise exports will face a very austere external trading environment in the coming few months”, officials remarked, stating the obvious. “If this is a foreshadow of things to come, I think investors across the globe will need to fasten in”, AxiCorp’s Stephen Innes said.

Carrie Lam’s approval rating fell to an all-time low of 9.1%. She’s now being blamed for mishandling the virus outbreak.

In markets, Japanese shares played the catch-up game after Monday’s holiday. The Nikkei plunged more than 3% in the worst rout since December of 2018.

Between that and the yen’s recent gyrations, top leaders in Japan convened an unscheduled  meeting to chat about the impact of the virus on markets.

“The key takeaway [from Monday] is that although the equity market has begun to price in some risk, all it has done is erase the extreme absurdity of the past three weeks”, JonesTrading’s Mike O’Rourke said.

Even if there is a lull in the news flow, that’s not the same thing as an all-clear. “All in all, it feels like an in-between day, with the market correction paused but not ended”, SocGen’s Kit Juckes said Tuesday morning. “A lack of new news on the coronavirus epidemic can’t really be seen as a solid foundation for any kind of sustained risk rally”.

And speaking of the impact of COVID-19 on markets, Donald Trump delivered his latest assessment on Tuesday.

“[Stocks] took a hit yesterday”, he admitted. “[But China] is getting it under control more and more”.


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2 thoughts on “‘Under Control’? Markets Wary As Virus Cases Rise, Hong Kong Exports Plunge, Japan Dives

  1. Your analysis has been invaluable. For the past 14 months, my thesis was that increasing money supply/ lower interest rates more than compensated for the negatIve economic news. At this point, my view is that this is no longer the situation.

  2. Middle East is done, they are too late to contain spread from Iran.
    It’s interesting about Iran, by the way. They have thousands infected, and it seems like they got virus about two month ago, earlier than all other nations and even earlier than other Chinese provincies. How did they get it?

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