US and European equities are poised to open lower after the CDC announced the first possible community spread of the virus in the US. The CDC cannot account for how a California resident contracted the virus. President Trump’s press conference failed to calm markets as his overall optimistic tone was often balanced with warnings from the health experts.

The S&P 500 is having the worst week since the financial crisis and it is unlikely to get any better as the corporate response is delivering a wrath of profit warnings. Uncertainty over the magnitude of global quarantine efforts could easily take US stocks to bear market territory. Volatility is likely to remain in place as the central banks and governments all over the world prepare to release the floodgates of stimulus. Once the concerns over coronavirus spreading eases, investors are expecting a rebound in stocks and that is why we will see many of the major dips attract some buyers.


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Prime Minister Johnson is ready to play hardball with the EU and is ready to walk away from talks in June if he doesn’t get a trade deal. The differences between Johnson’s demands and the EU primarily focus on how much the UK will follow EU regulations. Johnson wants his trade deal to be based on the Japan and Canada deals. The deadline of June appears rushed but is more of a political posturing move from Johnson. The British pound sold off the release of the negotiating mandate as the risk of a no-deal Brexit appear to be growing again.


Oil is in freefall as the magnitude of global quarantine efforts will provide severe demand destruction for the next couple of quarters. The first US case of unknown origin has energy markets preparing that a prolonged deep drop in demand for crude is upon us. Oil prices will remain very vulnerable here as the pandemic fears could deliver a greater shock to demand than what happened during the financial crisis. In 2008, WTI crude fell from the record high of $147.27 all the way down to the mid-$30s. The initial assessment earlier in the month was that energy markets might only have to deal with a 3 million barrel a day drop in Chinese demand, but that was obviously too conservative.

If WTI crude’s slide continues to accelerate, the $42.50 level could provide some support. Expectations are growing for OPEC + to deliver deeper production cuts next week, but any bounces with oil prices will likely be faded until a markets better understand what will be the total global shock to crude demand.


Gold is only modestly higher as the latest run of outbreak fears was met with profit taking. A record long streak of buying gold ETFs was snapped on Wednesday. Gold will be bolstered by pandemic fears, central bank and government stimulus, trade angst, and political uncertainty. Gold will eye the $1,700 an ounce level over the next couple weeks as the coronavirus outbreak worsens.


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