Daily Commentary BY THE CURVE TEAM –

Markets Unsure on Virus Impact

11th of February, 2020

Price action overnight suggests markets are unsure on the impacts as the virus spreads.

It is hard to get a handle on what markets think the impact of the Coronavirus will be as it continues to spread. Equity markets remain buoyant, which could be a sign they think that the Fed will look to support the economy at any sign of weakness.

Bond markets are a little indecisive. We have seen the ebb and flow over the past couple of days with the US 10-year yield still hovering around recent lows. The divergence between bond and equity markets is something to keep an eye on.

Meanwhile commodity markets such as oil continue to fall, suggesting lower demand is being priced in.

This comes as confidence continues to wane. The weekly consumer sentiment pulse from ANZ/ Roy Morgan has fallen a little further over the week ending February 9th. Consumer caution, combined with an expected extension of travel bans affecting Chinese tourists and students, could have a significant impact on the local economy.

We will also get an update on how business confidence and conditions have been impacted by recent events later today.

David Flanagan

Director - Interest Rate Markets