Increasing signs of corporate distress and the clear evidence of demand destruction in markets is driving investor sentiment back towards safe havens. Gold took another run at the US $1,700 level overnight and bonds issued by leading nations rallied. The disruption from the expiry of the West Texas intermediate crude oil May futures contract spread to Brent crude, dragging it to an eighteen-year low, and European and US indices dropped 2.5% to 4% as fear rose.

Global markets are teetering on the edge of a second leg down. The first leg was driven by the concerns about the spreading Covid19 virus and the uncertainty it created as authorities grappled with measures to contain the outbreak. The impacts are now showing up in macro data, company reports and commodity markets, and the economic damage caused by the containment measures is the market focus.

Share markets are vulnerable to the shift in investor focus. The Euro Stoxx 50 tumbled 4% overnight, and the Nasdaq composite dropped 3.5%. The speed and size of the falls point to a potential resumption of the ugly selling that roiled markets in March.

Asia Pacific investors are bracing for another tough day. Nikkei futures fell around 1.5%, but indications for Australia and Singapore are for opening losses of around 2%. The safe haven demand is supporting the US dollar this morning, putting the New Zealand, Singapore and Australian dollars under pressure.