Market Summary: The long and the short of it.
Asia
The Chinese markets re-opened in the early hours of Monday morning after the extended holiday period and they did not surprise the consensus opinion. The Chinese markets dove into the red at the open, the Shanghai Composite down -8.00% at the close.
Europe
Europe like the China A50 futures had the bad news already priced in. The European markets finishing higher on Monday with shares in London leading the region. The FTSE 100 was up+0.55% while Germany’s DAX advanced 0.49% and France’s CAC 40 rose +0.45%.
Americas
North and South American markets finished mixed as of the most recent closing prices. The Brazilian Bovespa gained +0.76% while the S&P 500 rose +0.73%. Mexico’s IPC lost -1.68%.
U.S. Treasuries gave back some gains as the markets rose with the 2- and 10-year yields rising to 1.35% and 1.52%, respectively. The exuberance was not shared by Crude Oil as WTI Crude was hammered again to fall below $50 a barrel for the first time in more than a year. Gold blinked as it held steady at $1,577 an ounce, Silver settled at $17.68 an ounce. Bitcoin regressed slightly to $9,232. The fear index the VIX fell 4% to 18.1.
China Conundrum
China did manage to quarantine an urban environment of some 60 million people, they shut down enormous cities like Wuhan, Huanggang, and Ezhou. This is an absolute first in terms of manpower and resources deployed to public health for any nation, anytime in history. Cities that are not on mandatory lock-down have chosen a self-imposed lockdown. Major foreign and domestic consumer companies are temporarily boarding up their retail outlets, McDonald’s, Starbucks, Disney, McCormick and Co, Anheuser-Bush InBev SA, Procter and Gamble, Microsoft, Apple, and Coca Cola. Not to mention the disturbance for domestic Chinese giants such as Alibaba, Tencent, Kweichow Mouta, Petro-China, Wuliangye, Yibin Co, the list goes on and on.
Wuhan is ground-zero of the coronavirus, it is the capital of Hubei Provence which is a significant business center for China. It lies at the strategic crossroads of the Yangtze and Han rivers and is at the center of railway crossroads between the north-south axis linking Guangzhou to Beijing and the east-west axis linking Shanghai to Chengdu.
Hubei Jingzhou Chengnan Economic Development Zone was established in 1992 and the Wuhan Economic and Technological Development Zone which is a national-level industrial zone was incorporated in 1993. Global industries that operate in Hubei include automobile production/assembly, biotechnology/pharmaceuticals, chemical production and processing, food/beverage processing, heavy industry, and telecommunications and hi-tech equipment, the list that is as long as your arm. If you are a global manufacturer, you are guaranteed that some part of your supply chain runs through Wuhan and the surrounding Provence of Hubei. If the coronavirus does not come under control soon, we will see the impact show up in all countries and all economies worldwide.
Who knows….perhaps that’s the point.