On Monday, when U.S. financial markets were closed in observation of the Presidents Day holiday, Apple warned investors that it does not expect to meet its quarterly revenue forecast because of slowed production and weakened demand in China resulting from the new coronavirus (now named COVID-19) outbreak.
Compared to a week ago, the number of confirmed cases worldwide has increased from 42,638 people to over 72,436 people, with a majority of the confirmed cases in China. While the number of people has grown, the daily increase of confirmed cases has slowed to an average rate of 3.92% over the past five days. The ratio of mortalities from the new virus ticked up to nearly 2.4% from around 2.2% over the same period. The ratio of those previously infected and being discharged from the hospital has steadily increased from 8.12% a week ago to 17.33% today. By comparison, the U.S. alone has had at least 26 million flu-related illnesses, 250,000 hospitalizations, and 14,000 deaths from the flu thus far, according to the Centers for Disease Control and Prevention (CDC) for the week ending February 8, 2020.
As the fallout from COVID-19 continues, economists have warned that Japan (the third-largest economy) is on course for a technical recession as Monday’s Q4 2019 GDP print came in well below analysts’ expectations of a 3.7% decline and instead saw the economy shrink an annualized 6.3%. This morning, South Korea’s President warned that “emergency steps” were needed to support the economy.
Both U.S. equity futures and USD rates moved lower in pre-market trading, as dented market sentiment over fears of economic fallout from COVID-19 persist. The 10-year U.S. Treasury note is trading 4.9bps lower to 1.541%, as investors flock to safe-haven assets, inverting the yield curve (3-month T-Bills are trading at 1.57%.) The USD interest rate swap curve continues to be inverted.
Key events coming up this week:
- Domestic market investors will be keeping an eye on the fallout from the coronavirus.
- Wall St. is beginning to value the various probabilities and outcomes in the election year. Investors will gain additional insight this Saturday from the Nevada Democratic Caucuses.
- “B-List” economic data releases this week:
- Flash Producer Prices for February will provide an early look at the hit to global manufacturing supply chains is due on Wednesday.
- Housing starts for December is due on Wednesday.
- Minutes from the January FOMC meeting is due on Wednesday.
