The World Health Organisation overnight declared the COVID-19 outbreak a global pandemic. Shares in Europe fell modestly, but the negative momentum led to a 5% rout in US stocks. In a surprising development, safe haven assets also came under pressure. With no end in sight to the spread of the virus, and consequent uncertainty about economic impacts, Asia Pacific markets are bracing for another turbulent trading day.

The WHO’s director general expressed concern about “the alarming levels of spread and severity, and by the alarming levels of inaction”. Mr Ghebreyesus went on to declare “We have rung the alarm bell loud and clear.” Global investors are looking for an end to the outbreak, or at least a peak in infection rates. The WHO declaration potentially opens another path to market stability – a co-ordinated response from major nations.

This is important in the context of the overnight action, as well-established relationships between asset classes appeared to break down. Gold slipped below US $1,650, and bonds were mixed. UK, German and US ten-year bonds suffered a sell off as higher yielding Spanish, Italian and Portuguese bonds rallied. This “cashing up” indicates at least some investors fear markets are yet to fully reflect the risks of the outbreak.

Currency traders took a calmer approach. The yen appreciated against the US dollar, and the Euro fell. Commodity currencies came under renewed pressure, with the Australian dollar slipping below US 65 cents.

Futures markets point to opening falls of 1% + for regional markets. The Australia 200 index weighting towards commodities may see it underperform today. Futures are down 200 points, indicating an opening slide below Monday’s spike low at 5,538.