Turbulence hits the markets after coronavirus ramps up

This report is brought to you by Sable International

In China, the coronavirus outbreak has placed many major cities under lock down, effectively shutting down the Chinese industry and putting 50 million people under “quarantine”. Prior to this outbreak, markets were all hitting all-time highs. Since the announcement of the virus, markets around the world have fallen sharply with investors placing funds in safe-haven asset classes and countries.

The coronavirus and the global fears

Last week, we saw the ZAR trading at R18.85 against the Pound, and at R14.49 against the US Dollar. This week, we have seen the risk-off sentiment propel the ZAR to R19.04 to the Pound and R14.57 to the Dollar. This move is in part due to market fears that the coronavirus will spread worldwide and the effect this will have on global demand.

In the UK, it was largely expected that the Bank of England will be cutting interest rates this week. After a few good data points over the last week, the market has largely priced that out and a UK recovery is the general consensus among traders.

This week, we have multiple data points, most notably the US Fed interest rate decision on Wednesday followed by the Bank of England interest rate decision on Thursday. Both the central banks are expected to maintain rates stable at 1.75% and 0.75% respectively. In the event of any deviation in this, we can expect an extreme market reaction. In addition to these events, we have EU CPI and GDP data on Friday, which will give us an indication of the state of the European markets.

Overall, it is advised that one monitor the markets closely as traders are on edge and any new development in this coronavirus saga could cause extreme movements on both the upside and downside.

Market event calendar:

Tuesday 28 January                                                                                                                 

• US durable goods orders

Wednesday 29 January                                                                                                           

• US Fed interest rate decision

Thursday 30 January                                                                                                                

• UK BOE interest rate decision

Friday 31 January                                                                                                                     

• EU CPI and GDP data