Market Summary: The long and the short of it.
The corona-virus once again dominated the markets with both Europe and the Americas nose-diving into the red on opening and following the Asian markets lower.
EUROPE
The European markets finished sharply lower with shares in the German Dax -2.74% leading the region down, while the French CAC 40 -2.68% and London’s FTSE 100 dipped -2.29%.
AMERICAS
The North and South American markets fared no better, Brazils Bovespa closed down -3.29% while Mexico’s IPC was off -2.23% and U.S.’s S&P 500 dropped -1.57%, extending the two-day decline to -2.5% and all but erasing its gains year-to-date.
CRUDE & PRECIOUS METALS
Crude oil and the precious metals extended their recent divergence with WTI crude falling below $53 a barrel while Gold rose to $1,582 an ounce, up +25% since it’s May low. Silver closed at $18.09 an ounce, up +24% since last May’s low.
FEAR
The fear index “the VIX” spiked more than 20% to the 18 handle, the most elevated close since October.
U.S. Treasuries also continued their feverish rally as investors fled in search of safe havens, with the two- and 10-year yields sinking to 1.44% and 1.6%, respectively.
Bitcoin also continued its impressive rally since the start of the year, closing at $9078 up almost +30% since it’s December low.
SELLING PRESSURE
Of note, in the markets, the sectors that took the brunt of the selling were transportation stocks, hotels and gaming casinos. Names like Wynn Resorts (WYNN), Las Vegas Sands (LVS), and MGM Resorts (MGM) were all down, falling by as much as -8% in Wynn’s case. Meanwhile, American Airlines (AAL) was down almost -6% and United Airlines (UAL) fell -5%.
Airlines with long-haul flights into or out of China might suffer the most, along with companies like luxury retailers with large footsteps in China, basically any company that does a lot of business in the world’s second-largest economy.
WHAT NEXT?
However, the question on most market participant’s minds is…will this be a repeat of SARS in 2003, will this burn itself out, or will this be much worse? Despite the arguments for and against in the media, we are of the opinion that it is too early to tell. Although as virulent and as potentially infectious as SARS, there is not enough data available to confirm if this can become a global pandemic.