Market Volatility Continues as Virus Spreads in the US

 

Market volatility continues as coronavirus spreads. Coronavirus cases continue to spread in the US, overall infections rising to 159 (led by 31 cases in the city of Seattle). The true economic impact of the virus on global growth remains unknown, but some estimates for virus-stricken countries like China have called for a double digit recession in Q1, followed by a quick “v-shaped” recovery later in the year. Markets have continued to whipsaw in response to fears around the virus, the S&P 500 and Dow Jones Industrial Average opening lower this morning by 2.5% while the 10-year Treasury yield sits 12 basis points lower to start the day at 0.94%. Fed Funds futures now imply an additional 50 basis point rate cut mere days after the Fed’s latest emergency rate cut.

 

 

OPEC cuts oil output in response to demand it. OPEC ministers agreed to cut oil production by 1 million barrels in the second quarter in an attempt to limit the coronavirus impact on oil prices. Facing a large demand shock, the oil cartel came to an agreement without the support from Russia (who had been a vocal opponent of any production cuts). Oil prices initially rallied on the announcement, but erased gains to remain little changed on the day.

 

 

Day ahead. Jobless claims numbers form this morning showed a 3,000 decline to 216,000. US labor productivity came in at 1.2%, 0.2% lower than economist predictions. BOE Governor Mark Carney will be speaking at the University College London and Bank of Canada Governor Stephen Poloz will speak in Toronto about the economic outlook. Dallas Fed President Robert Kaplan, Minneapolis Fed President Neel Kashkari, and New York Fed President John Williams will all speak this evening about monetary policy.