A $1.5 trillion and more wiped out: Coronavirus fallout across assets

The ink was barely dry on Wall Street’s 2020 outlooks when the first case surfaced in Wuhan. But what began as a single patient suffering pneumonia-like symptoms on December 12 has morphed into a deadly virus that’s sent global markets reeling.

 

A quick tally shows the coronavirus has wiped $1.5 trillion off the value of world stock markets since January 20, when a slide in Hong Kong shares kicked off concerns among traders. Yet with Chinese and Hong Kong exchanges shut for an extended holiday, that’s a lowball figure.

 

As Treasuries drift and US stock-futures gain in early Tuesday trading, the epidemic’s toll looms large across assets. Raw materials have been hit hardest, with the Bloomberg Commodity Spot Index slumping 4.5 per cent. Meanwhile havens have rallied as investors seek safety.

 

The Bloomberg Barclays Global Aggregate Treasuries Total Return Index is up 1.3 per cent, while the Bloomberg Dollar Spot Index has strengthened 0.5 per cent.

 

Here’s a look at how the major global asset classes have reacted so far.

 

Stocks: With the virus originating inside its borders, China’s stocks have borne the brunt of its spread. Though local markets remain shuttered until Febuary 3, futures on the FTSE China A50 Index have fallen over 10 per cent since January 20. Equities across the world have slumped, with Asia the worst-performing region while European shares have emerged relatively unscathed.

 

Bonds: Investors have been rushing to the comfort of US Treasuries with year-to-date declines in 10-year yields now sitting at over 30 basis points. The global benchmark yield has fallen out of the uptrend it was in since September, with a growing number of strategists targeting 1.5 per cent. The move has reverberated across the globe, with rates on bonds at the lowest since October and Australian equivalents back below 1 per cent. The market value of negative-yielding debt jumped on Monday by $860 billion, the most in a day since Bloomberg began tracking the data regularly three years ago.

 

Commodities: Traders are dumping oil and industrial metals on fears the virus will crimp worldwide demand. WTI crude has fallen around 9 per cent since January 20, putting it on course for the biggest monthly decline since May. But gold is showcasing its long-standing reputation as a haven in troubled times, trading near the highest close in more than six years.

 

Currencies: The historic calm in currency markets snapped as the outbreak gained traction, with the offshore yuan sliding to its weakest level this year. That pushed dollar-yuan above both its 50-day and 200-day moving averages, with traders watching closely as the pair nears 7, an important psychological level.