The acceleration of coronavirus proliferation outside China is shocking to global financial markets. Gold, as a safe haven in times of volatile geopolitical situations, renews its seven-year highs. The yields on ten-year United States Treasuries fell to 2016, and the German bond curve repeats previous sessions, closing with a fall.
Review of the world's most important events on Monday
- Coronavirus - acceleration of proliferation outside the People's Republic of China
The speed of coronavirus spreading around the world is gaining momentum - last weekend there was an outbreak of infection in Italy, South Korea and Iran, raising concerns about the growth of the global world economy. The Italian government has quarantined several cities in the north of the country to stop the biggest coronavirus outbreak outside China, commenting that the epidemic could have economic consequences throughout the European Union due to its deeper spread.
At the beginning of the week, most of China's quarantine zone was weakened by transport and tourism restrictions as the number and rate of new infections outside the most critical province fell significantly to its lowest level in a month.
- Fall of the world markets
All over the world, there is a decline in stock markets due to worsening forecasts for global economic growth. The Milan FTSE MIB Index fell by more than 4%, the lowest level since 2016. The Frankfurt and Paris stock exchanges showed a 3% decline and the London FTSE a 3.4% decline. South Korea's KOSPI fell 3.9% due to a high level of anxiety announced by the government and Australia's S&P\ASX 200 fell 2.25%. China's Shanghai Shenzhen CSI 300 "Blue Chips" closed at 0.4%. In Japan, the stock market did not work yesterday as the country celebrates the Emperor's Birthday. U.S. stock indices showed a significant decline, futures on Dow fell 700 points (2.5%), while the S&P 500 and Nasdaq 100 fell 2%.
- Rally of gold.
Based on the gold prices, we can see that investors are turning to the safe haven, as gold growth reached 2% over the past 24 hours (spot price $ 1689.24 per ounce), which is the highest since February 2013. The price reached its seven-year high amid a mass flight of investors to the safe haven due to fears that the increasing spread of coronavirus outside China will hit global economic growth. Fears of a coronavirus pandemic intensified after a sharp rise in new cases reported by Italy, South Korea, and Iran over the weekend. However, China has eased restrictions on movement in several provinces, including Beijing, as the spike in new cases in the country has slowed.
- Bearish rally of bonds
The yields on US Treasury bills declined to 1.401% on Monday, the lowest level since June 2016. Yields on 30-year US Treasury bills reached a record low.
Yields on German 30-year bonds for the first time since October 2019, were negative, falling by 6 points (-0.022%), indicating that the yield curve in the largest economy of the European Union was reflective. According to Elvin de Groot, head of Rabobank's macro-strategy department, this decline could become another point of decline, causing a recession in many EU countries.
- Growth in Germany's business confidence index
Unexpected in February was the growth of the business confidence index in Germany, which may indicate that the impact of the coronavirus on the economy is minimal.