TODAY ON WALL STREET: Mike Pence to the rescue

Wall Street’s equities keep on falling, as the panic is still very present among investors.

 

Futures tied to the S&P 500 were down 1% and the yield on the 10-year U.S. Treasury note dropped further to 1.303%.

Elsewhere, the Stoxx Europe 600 declined 2.3% and the German DAX fell 2.5%, while Japan's Nikkei 225 dropped 2.1%.

More than 82,000 people have been infected and the death toll stands at more than 2,800 globally. A patient in California might be the first U.S. coronavirus case to be diagnosed without any history of travel to China or any other countries affected by an outbreak.

Yesterday, Donald Trump spoke at a press conference where he acknowledged that there is a likelihood that the situation will worsen in the United States, while reaffirming that the country is well prepared. He named Vice President Mike Pence as the person responsible for fighting the epidemic.

Authorities around the world are deploying their crisis plans, without, at this stage, locking down their borders. Companies, for their part, are warning that their results will be affected by the situation. The last highly symbolic warning is from Microsoft, which is selling fewer licenses because the supply of computer hardware is disrupted. This is only the beginning: hundreds of warnings will follow.

The downturn is not over yet, as there are still too many areas of uncertainty and the reactions are too exacerbated. The Sao Paulo stock market lost 7% after the first case of infection was revealed in Brazil. As I wrote yesterday, the central banks are going to come back to the front of the stage. But the question of their effectiveness in this type of crisis arises. Let's take a plausible scenario: the Fed will cut rates by a quarter of a point in the coming weeks to send a positive signal to economic players. This measure will not cure anyone and will not help revive supply chains, whose disruption is currently the main threat to the economy (even if China restarts).

On the agenda, we have January's M3 money supply in the euro zone, Durable Goods Orders, a new reading of Q4 GDP and weekly Unemployment Claims, followed by Old Home Sales figures.