Global equities suffered their sharpest declines since the 2008 financial crisis last week, while commodities plunged on concern the spread of the coronavirus will tip the global economy into a recession. In the Treasury market, both 10- and 30-year yields fell last week to record lows. The offshore Chinese yuan per dollar rate — which ended Friday at 6.9798 — will be closely watched as it could potentially weaken again above the 7 mark.
Investors are looking to not just the Fed and other major central banks — even with their limited ammunition — to contain the fallout from the outbreak. Fed Chairman Jerome Powell in a statement on Friday said the U.S. central bank is ready to cut interest rates as the epidemic“I can see rates continuing to fall in the near term as there is no sign of a cure or vaccine,” said Priya Misra, head of global rates strategy at TD Securities.
“Powell was unusually dovish on Friday and I expect a stream of Fed speak to confirm this pivot before Friday’s blackout period” “Rates are already low and that’s positive for emerging markets. It’s beneficial for consumption in all of these countries. For me, it’s less about rates coming down more in the U.S.; it’s more about not going up any time soon. If rates were to stay or be around where they are now, it’s definitely a positive”“Markets will open down a lot, but more likely because of the virus spreading in the U.S. The Chinese PMI was bad but I don’t think worse than expected. Super Tuesday in the U.S.
“We also expect some institutional investors to start buying the dip on expectation of fiscal and monetary stimulus, virus spread being more contained in the West versus China due to the timely response from the respective health authorities and declining supply-chain disruptions in China. Overall people will continue to diversify into safe-haven assets such as U.S. treasuries, gold and the U.S.