Risk aversion sentiment dominated markets this morning once again as the global stock market erased early Asian gains. The US futures hit fresh “limit-down” as the Dow index fell by 1,000 points, while the major Asian-Pacific markets ended in deep red. Crude oil prices dropped to 17-year lows as WTI dropped near $26 as Saudis boost oil exports at a time of lower oil demand.

 

Coronavirus Update:

Global cases: At least 184,976, according to the latest figures from the World Health Organization

Global deaths: At least 7,529, according to the latest figures from the WHO

Italy had at least 2,503 virus-related deaths as of 6 p.m. local time on March 17, according to the country’s health ministry.

 

Market reaction:

US stock futures fell into “limit-down” territories during early European session on Wednesday as the markets remained highly volatile on concerns for global economic recession amid virus outbreak.

European stock markets opened this morning with 5% losses while the Asian-Pacific markets settled with 3% losses erasing the early morning gains. Australian indices finished the day with more than 7% losses.

However, the situation was totally different last night as the US stock markets settled with 6% gains, cheering the $1 trillion fiscal stimulus package announced by White House to decrease the economic impact from the coronavirus pandemic.

 

Crude oil: WTI dropped to 17-years low

Crude oil prices fell 2% on Wednesday European early session, extending the yesterday’s 6% losses on growing fear for global recession and supply glut. WTI oil price hit 17-year low of $26 per barrel while Brent oil price broke below $30, currently pricing near $28 per barrel.

Fig 1, WTI crude oil, Monthly chart

The massive sell-off in the energy market supported from the decision of Saudi Arabia to increase its oil exports to 10m barrels per day in May. The “oil price war” between Saudi Arabia and Russia for market share will deteriorate the already oversupplied market at a time when oil demand is collapsing from travel bans and lower economic activity to contain the coronavirus.

 

Forex Market:

The US dollar rallied against major currencies supported from US stimulus package, lower Treasury prices and stronger demand in the spot market. The dollar index jumped by 1.5% yesterday, reaching intraday highs near 100 before retreated back at 99.33 this morning.

Fig 2, DXY-US dollar index, Daily chart

The U.S. currency has managed to cover all the losses occurred in early March triggered from the fear for economic slowdown in US on virus outbreak and the rally on U.S Treasuries.

The Euro currency was the weakest amongst major peers on growing concerns about the Eurozone’s economic outlook and the risk for recession amid the virus effects.

Fig 03: EUR/USD pair, 1-hour chart

The sell-off in the common currency triggered yesterday after the disappointed German economic sentiment combined to the stronger US dollar. As a result the EUR/USD pair lost almost 200 pips, down from the intraday highs of 1.12 to the lows of 1.095 before rebounded this morning just above 1.10 key levels.

 

Economic Calendar for March 18, 2020:

 

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Vrasidas Neofytou

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