A daily summary and commentary of events and factors that affect the global markets, with a particular emphasis on the foreign exchange markets.
The Twilight Zone
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David Atkinson Foreign Exchange Sales Manager
If there was ever a Friday when markets needed to close out a week and take a huge breath, it is this week. After yesterday’s US equities plunge that erased another 3%+ from US stocks, Europe followed suit. Asian stock markets were only a little less battered, dropping in the 2%+ range. Heading into the weekend, US stocks are down 3%+ yet again as we limp into the weekend.
The US 10-year Treasury yield briefly dropped below 0.70%, and the 30-year Treasury briefly touched below 1.30% -- of course, all-time lows for those instruments. It was only February 20 when the 30-year went below 2% decisively for the first time and February 26 when the 10-year was at the same yield where the 30-year is now.
Cue the Twilight Zone music.
We did have a major economic release today, with non-farm payrolls coming is at 273,000 against consensus estimates of 175,000 with total revisions for the last two months adding another 85,000. The unemployment rate improved by a tick to 3.5%. Average hourly earnings were flat. When the numbers came out, there were essentially no moves in markets since this data was from early-to-mid February before all the craziness started. Interestingly, some commentators noted today that more contemporary data like initial jobless claims have not yet pointed to a major recession, but clearly we are going to see some signs of weakness as slower economic activity works its way through into numbers.
As we have noted before, a situation like this is so incredibly hard to predict in terms of economic effects. We can analyze disruptions like trade wars and credit conditions, but a virus with an asymptomatic ability to spread will see outbreaks in various areas of the world by definition; then, the economic effects pile on after that.
We will leave it there for now. Have a restful, safe weekend.
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