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Investors hit the panic button

Investors hit the panic button

Share markets tanked in overnight trading as equity investors finally moved into line with other markets. European and US indices fell by 3% to 4%. Crude oil dropped 4%, and base metals fell. In contrast safe haven markets extended recent gains. US ten-year bonds traded down to 1.36%, and thirty-year bonds hit their lowest point ever at 1.83%. Gold lifted towards $1,700 an ounce, and the Japanese yen gained a big figure.

Significant viral outbreaks in Japan, Korea and Italy raised pressure and forced investors to acknowledge both supply and demand shocks. The disruption to supply chains if countries close borders to contain outbreaks could see global trade grind to a halt.

Strong rallies in bonds and gold over the last two weeks reflected growing worry about the economic impact of the COVID19 virus. Many share markets hit all-time highs over the same period, despite these clear warning signs. An important driver of the overnight damage in stocks was the sharp reversal in sentiment from complacency to concern.

Futures markets indicate further pain for Asia Pacific investors. Australia 200 futures closed the overnight session down 167 points. The macro headwinds could see weaker than forecast earnings results from Estia Health, Qube Logistics and Spark Infrastructure severely punished in trading today.

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