Daily market review

United States

The global flight to quality rolled on Monday, with equities and risk assets facing heavy selling and US Treasuries rallying. The Dow industrials dropped 12.9 percent, the S&P 500 lost 12.0 percent, and the NASDAQ was off 12.3 percent.

Disruptions to business activity, widespread closures of stores and businesses, travel limits, and the ongoing perception that authorities in the US and elsewhere are not coping with the pandemic contributed to the ongoing selloff.

Among sectors, consumer staples and communications services held up best while financials, energy, and real estate suffered most. A renewed drop in oil prices on global recession fears added to the turmoil.

Among companies in focus, Wynn Resorts dropped 24 percent after saying its properties would close temporarily. Lululemon, the sportswear company, fell 21 after announcing store closures, and after it was downgraded by Deutsche Bank. Citigroup, down 20 percent, led banks sharply lower after suspending share buybacks. United Airlines dropped 14.8 percent after warning its business could plunge in the second quarter. On the positive side, Kroger, the grocer, gained 1.3 percent on heavy demand, and said it was hiring stockers. Clorox gained 4.3 percent on analyst upgrades as its cleaning products see high demand.

In US economic news, Empire State's manufacturing index fell to an 11-year low at minus 21.5 in a March report, however, where many details were less dramatically weak than the headline.

These data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil fell US$4.21 to US$29.83, while gold fell US$25.30 to US$1,497.00. The US dollar fell sharply against major currencies. The US Treasury 30-year bond yield fell 21 basis points to 1.34 percent while the 10-year note yield dropped 26 basis points to 0.72 percent.


Fallout from the Covid-19 pandemic hit stocks hard Monday but major indexes ended above their worst levels. The Europe-wide STOXX 600 declined 4.9 percent, the German DAX fell 5.3 percent, the French CAC dropped 5.8 percent, and the UK FTSE-100 was off 4.0 percent.

Health officials across Europe reported the situation was deteriorating rapidly, with rising numbers of infections and deaths. Authorities announced an array of business closures and restrictions on gatherings and other activities intended to limit the spread, along with government relief efforts.

Among sectors, travel & leisure stocks fell the most as new travel restrictions went into place, and many airlines laid off workers and grounded their fleets. Air France was off 12 percent, and Lufthansa fell 11 percent. Banks were among the worst performers, with French banks SocGen down 17 percent and Natixis down 18 percent.

Among companies warning on virus disruptions to business, Swedish retailer Hennes & Mauritz fell 11 percent despite reporting in-line quarterly results, and Electrolux, the Swedish appliance giant, fell 10 percent.

Asia Pacific

Major Asian markets again fell sharply as trading resumed Monday. Despite Friday's bounce on Wall Street and a subsequent round of additional policy support from major global central banks, investor sentiment was again hit hard by alarm over the further spread of the global coronavirus and the escalating social and economic disruption. Chinese data published Monday also showed the extent to which domestic activity slumped in the first two months of the year.

Australia's All Ordinaries index was again the weakest performer in the region Monday, collapsing 9.5 percent on top of heavy losses already posted this month. Moves elsewhere were less severe but still substantial. Hong Kong's Hang Seng index fell 4.0 percent on the day, the Shanghai Composite index dropped 3.4 percent, and Japan's Nikkei and Topix indices closed down 2.5 percent and 2.0 percent respectively.

Accompanying the Federal Reserve's policy measures, announced just before the start of trading in the region, central banks around the region issued strong statements designed to improve liquidity conditions and reassure financial markets in response to the pandemic's impact. The Bank of Japan, scheduled to conclude its policy meeting Wednesday, brought forward its decision by two days. Although policy rates were left on hold, officials announced an "enhancement" of monetary easing, consisting of increased supply of funds to purchase Japanese government bonds, an additional lending program, and purchases of exchange-traded funds and real-estate investment trusts. The BoJ will also participate in broader G7 efforts to boost liquidity in US dollar funding markets.

The Reserve Bank of New Zealand also held an unscheduled policy meeting early Monday and delivered a cut of 75 basis points to its official cash rate, taking it to 0.25 percent citing the "negative economic implications" of the pandemic on its economy. The Reserve Bank of Australia later released a statement advising that it stands ready to purchase Australian government bonds in the secondary market and will conduct repo operations at a range of maturities in order to support adequate liquidity.

China data published Monday showed a crash in economic activity in the first two months of the year, though this information was broadly in line with PMI survey data published at the start of the month. For January and February combined: industrial production fell 13.5 percent when compared with the first two months of 2019; retail sales fell 20.5 percent; and fixed asset investment fell 24.5 percent.

Looking ahead*

On Tuesday in Asia/Pacific, Singapore merchandise trade, Reserve Bank of Australia meeting minutes, and Australia residential property price reports are due. In Europe, the UK labor market report and German ZEW survey figures are scheduled. In the US, retail sales, industrial production, business inventories, housing market index, and JOLTS job openings are on tap, plus Canadian manufacturing sales.

Global Stock Market Recap

Global Bond Market Recap

Global Currency Recap

Commodities and currencies