Stocks extended losses in overnight trading as the spread of COVID19 roiled sentiment. A statement from the US Center for Disease Control and Prevention that an outbreak in the Americas is a virtual certainty hit hard. Shares slumped and WTI crude oil dropped below $50 a barrel.
Safe haven assets disappointed. Bonds were mixed, and gold fell despite the growing panic. This follows strong moves in these assets over the last three weeks and supports the idea that stocks are merely catching up with other asset classes. One exception was US ten-year bonds, hitting an all-time low yield of 1.305% last night.
The CDC statement called on US citizens to prepare for an outbreak, stating it was a matter of “not if, but when”. The authority also warned of disruption to social and sporting events, as well as economic activity. The market reactions appeared to ignore White House representative Larry Kudlow’s comments in a television interview that the virus is “contained”.
Energy, materials and industrial sectors all dropped more than 4%, leading markets lower. Companies around the world have warned of the impact on bottom lines if supply chains that run around the globe. Asia pacific trading once again faces a torrid opening.