The Friday Market Minute
- Global stocks extend slump, while benchmark 10-year Treasury yields hit a fresh all-time low, as the coronavirus spread continues to grip world markets.
- Ten-year note yields touch 0.70%, while 30-year bonds trade south of 1.35%, as investors drive cash into safe-haven assets.
- CBOE's VIX volatility index opens 50% higher at 47.80 points.
- Gold extends best one-week rally since 2011, rising pst $1,690 per ounce, as the yen rises to a six-month high against the U.S. dollar.
- U.S. coronavirus cases rise to 233, with 12 deaths, as lawmakers approve an $8.3 billion emergency spending package to halt its advance in the world's biggest economy. Worldwide infections top 100,000, Johns Hopkins tracker indicates.
- Global oil prices slide, despite an OPEC agreement on production cuts, as demand forecasts deteriorate.
- U.S. equity futures suggest sharp opening bell declines on Wall Street ahead of the February jobs report at 8:30 am Eastern time.
Wall Street futures extended declines Friday, while benchmark 10-year bond yields hit a fresh all-time low, as fears of a global coronavirus pandemic continue to grip world markets.
Stock futures briefly pared some of that decline, however, following data that showed U.S. employers added a much-larger-than-expected 273,000 jobs last month, compared to an upwardly-revised January tall of 273,000 and the Street consensus of 175,000.
The headline jobless rate slipped to 3.5%, the Labor Department said, while average hourly earnings slowed to an annual rate of 3.0% from 3.1% in January.
From a little-read headline about a mysterious flu-like disease spreading through the central Chinese industrial city of Wuhan on January 8, affecting some 39 people, COVID-19 has expanded to just over 100,000 cases across 70 countries around the world, prompting government officials, health experts and business leaders to recommend travel restrictions, factory closures and stay-at-home prevention techniques to tame its rapid spread.
The surprising breadth of the infections, as well as its advance in both western Europe and the United States over the past week, has hammered risk assets around the world, driving investors into safe-haven assets such as U.S. Treasury bonds, gold and the Japanese yen amid concerns of a global recession.
Benchmark 10-year notes, in fact, touched an all-time low of 0.669% in overnight trading, only three days after falling below 1% for the first time ever after the Federal Reserve's emergency rate cut, before easing to 0.728% . Thirty-year bond yields rallied to 1.35% in the biggest one-day decline since 2011 amid a flight-to-safety move that affected markets all over the world.
The Japanese yen, a traditional safe-haven purchase for investors in the Asia region, rose to a six-month high of 105.14 against the U.S. dollar in overnight trading, as investors extended bets on further Fed rate cuts to soften the expected economic hit from the virus, while gold prices rose 0.1% to trade at $1,686.78 per ounce, extending its best week of gains in nearly a decade.
U.S. equity futures, meanwhile, continued to track U.S. Treasury bond yields following last night's near-1,000 point decline for the Dow Jones Industrial Average, with contracts tied to the benchmark indicating an 845 point opening bell decline while those linked to the broader S&P 500 suggest a 107 point pullback at the start of trading.
The job market, in fact, will remain a key to supporting U.S. economic growth in the coming months if the coronavirus continues to escalate, given the importance of consumer spending and the fact that airlines and other transports sector companies are bracing for a sharp reduction in overseas demand.
Consumer strength, in fact, was cited by President Donald Trump during a rally in Scranton, Pennsylvania last night, where he noted that while COVID-19 "certainly might have an impact ... at the same time, I have to say people are now staying in the United States spending their money in the U.S., and I like that.”
“It’s going to all work out. Everybody has to be calm," Trump added. "We have plans for every single possibility and I think that's what we have to do. We hope it doesn't last too long."
European stocks were notably lower by mid-morning trading Friday, as well, with the Stoxx 600 falling 3.7% in Frankfurt as the euro rose to 1.1316 against a weakened U.S. dollar, lead to the downside by travel and leisure and basic resource stocks.
Britain's FTSE 100, at the same time, fell 3.5% in early London trading and the ultra-defensive SMI index in Switzerland was marked 3.75% lower in Zurich.
Global oil prices also failed to hold onto recent gains, and continue to trade in bear market territory, as investors offset the impact of OPEC's proposal to extend production cuts by 1.5 million barrels per day -- to a 3.2 million daily total -- until the end of the year during their meeting in Vienna yesterday with the expectation of slumping demand from the world's biggest energy importers.
Prices slumped further, however, after Reuters reported that non-OPEC member Russia, which was expected to contribute around 500,000 barrels to the production cut, is only prepared to extend, not deepen, the current arrangement.
Brent crude futures contracts for May delivery, the global benchmark, were last see seen $2.27 lower from their Thursday close in New York and trading at $47.72 per barrel, while WTI contracts for April were seen $2.02 lower at $43.88 per barrel.
Overnight in Asia, the yen's safe-haven rally pushed the Nikkei 225 2.72% lower on the session, with the benchmark closing at 20,749.75 points as stock in the region followed Wall Street lower, pulling the MSCI ex-Japan benchmark to a session decline of 2.17%.