KITCO NEWS/Jim Wyckoff
Gold prices up as anxiety escalating amid coronavirus uncertainty
March 6, 2020
“Safe-haven gold prices are solidly higher in early U.S. futures trading Thursday. Risk aversion is increasing heading into a very uncertain weekend amid the coronavirus outbreak scare that is wreaking havoc in the world marketplace. April gold futures were last up $11.00 an ounce at $1,678.10. May Comex silver prices were last down $0.063 at $17.33 an ounce. The just-released U.S. employment situation report for February from the Labor Department showed non-farm payrolls up 273,000, a big upside from the forecast.
But global stock markets were solidly lower overnight, following the big losses in the U.S. stock market on Thursday. U.S. stock indexes are again pointed toward sharply lower openings when the New York day session begins … It’s hard to conceive the U.S. stock indexes recovering today, heading into another uncertain weekend and what next Monday may bring on the coronavirus front. Some U.K. factories have moved to a four-day work week. The impact on German and Euro zone automotive manufacturers is expected to be severe in the short term.”
THE WALL STREET JOURNAL/Joe Wallace
Virus Jitters Put Gold on Track for Best Week Since Financial Crisis
March 6, 2020
“Gold prices are on track for their best week since the depths of the 2008-09 financial crisis, an advance that is being fueled by the hunt for safe-haven assets as concerns about the coronavirus prompts investors to shun equities. The precious metal rose 1.1% to $1,686.50 a troy ounce Friday, putting it on course to gain 7.2% this week. Gold prices tend to advance when investors are seeking alternatives to risky assets during periods of market turbulence.
The gains came as government-bond yields slid and futures pointed to further declines for U.S. stocks, demonstrating the anxiety gripping markets as the coronavirus outbreak disrupts business activity in the U.S. and other major economies. There’s a growing expectation among investors that the Fed will cut interest rates by another half a percentage point, after the central bank lowered borrowing costs ahead of schedule this week. ‘Gold, together with bonds, is exhibiting immunity toward the virus that is currently wreaking havoc across other financial markets,’ said Ole Hansen, head of commodity strategy at Saxo Bank. He said investors have little reason to fear they are missing out by owning gold … because the coronavirus epidemic has pushed U.S. Treasury yields, adjusted for inflation, further below zero.”
Coronavirus wreaks financial havoc as infections near 100,000
March 6, 2020
“Business districts around the world began to empty and stock markets tumbled on Friday as the number of coronavirus infections neared 100,000 and the economic damage wrought by the outbreak intensified. An increasing number of people faced a new reality as many were asked to stay home from work, schools were closed, large gatherings and events were cancelled, stores cleared of staples like toiletries and water, and face masks became a common sight.
In London, Europe’s financial capital, the Canary Wharf district was unusually quiet. S&P Global’s large office stood empty after the company sent its 1,200 staff home, while HSBC asked around 100 people to work from home after a worker tested positive for the illness. In New York, JPMorgan divided its team between central locations and a site in New Jersey while Goldman Sachs sent some traders to nearby offices in Connecticut and Jersey City. The outbreak, which has killed more than 3,300 people globally, has radiated across the United States. Moves by major economies including the U.S. to cut interest rates and pledge billions of dollars to fight the epidemic have done little to allay fears about the spread of the virus and the economic fallout.”
The February Jobs Report Was Fantastic. Why It Doesn’t Matter.
March 6, 2020
“Employers hired at a strong clip in February, unaffected at that point by the impact of the spreading coronavirus. The much better-than-expected report did little to lift stocks, which continued their steep declines premarket Friday. In the minutes after the jobs data, futures on the S&P 500 were down 90 points, while futures on the Dow Jones Industrial Average were off 688 points. The yield on the 10-year U.S. Treasury note, which fell below 1% for the first time this week, slid to 0.73% Friday morning. Nonfarm payrolls rose 273,000 last month, the Labor Department said, much more than the 175,000 economists surveyed by Bloomberg anticipated.
Many analysts say investors shouldn’t put too much stock in the February report, though it is worth considering how the economy was faring before the coronavirus began spreading across the U.S. Most data over the past month has been tracking higher, even if only modestly to moderately so.
‘We can of course throw all of this data out the window as everything resets in light of what’s now going on,’ said Peter Boockvar, chief investment officer at Bleakley Advisory Group. Businesses across the country have expressed concerns that the spreading virus is negatively affecting travel and tourism, delaying manufacturing supply chains and hurting sentiment, suggesting the impact from the virus has started to affect the U.S. economy … Labor said notable job gains occurred in restaurants and bars, one industry that seems more likely than others to feel the pain should virus fears keep consumers home.”
The coronavirus crash has wiped out $9 trillion. Global markets are still falling
March 6, 2020
“Global markets slumped again on Friday, tracking heavy losses on Wall Street and staging a repeat of last week’s bloodbath on growing signs that the novel coronavirus outbreak will lead to a sharp economic downturn. About $9 trillion has been wiped off global stocks in nine days, Bank of America said in a research note after US markets closed deep in the red again on Thursday. Japan’s Nikkei 225 led declines among Asia’s main indexes on Friday, closing down 2.7%. South Korea’s Kospi fell 2.2%. Hong Kong’s Hang Seng Index dropped 2.3%, and China’s Shanghai Composite declined 1.2%.
In Europe, London’s FTSE100 was trading 3% lower on Friday morning. Germany’s DAX was down 3.5% and France’s CAC40 was 3.6% weaker. As Asian and European markets fell Friday, so did US stock futures. Dow futures were last down 580 points or 2.2%. S&P 500 and Nasdaq Composite futures fell more than 2% each. Wild market swings over the past few days indicate how nervous investors are about the unfolding outbreak. There are now nearly 98,000 confirmed cases of coronavirus worldwide, and almost 3,400 deaths. South Korea, Italy, Japan and Iran have become hotspots, recording the most cases outside of mainland China. And the rate of infection continues to climb in the United States and the United Kingdom. Oil prices extended their downward slide, despite plans by OPEC to slash the supply of crude oil by 1.5 million barrels a day.”
MARKET WATCH/Steve Goldstein
Fed is already behind the curve says Goldman as firepower could be half as usual
March 6, 2020
“Would the Fed ever do two inter-meeting rate cuts? The central bank is already behind the market as traders gobble up government bonds. The action in bonds has been stunning. The yield on the 10-year Treasury — the security that underpins valuation of pretty much every asset — fell 18 basis points to 0.75%. The yield on the 2-year Treasury is now a full half-point lower than the federal-funds rate the Fed targets. Yields move in the opposite direction to prices.
‘In essence, the markets are expecting the Fed to keep lowering interest rates, signal that there’ll be further rate cuts, and confirm that it has no intention of unwinding those cuts, even if the economic conditions were to improve. It’s fair to say that this is an extremely difficult ask; the path ahead for the Fed will likely be tricky, with plenty of scope for policy errors and miscommunication,’ said Frances Donald, chief economist at Manulife Investment Management. David Mericle and Alec Phillips, economists at Goldman Sachs, ponder what the Fed could do if it brought interest rates to zero, given that several policy makers have said they are not interested in joining the European Central Bank in setting negative interest rates.”