By Geoffrey Smith
Investing.com -- The coronavirus continues to spread across the world, as the number of confirmed cases jumps again in South Korea and Iran. Sub-Saharan Africa also contirms its first case. Asian and European stock markets fall sharply in the wake of Wall Street's Thursday panic, while Brent crude dips briefly below $50 a barrel. The Bundesbank acknowledges a likely hit to the German economy. The Turkish and Russian currencies weaken as the two countries come close to direct confrontation in Syria. And there are also U.S. household income data due. Here's what you need to know in financial markets on Friday, February 28th.
1. Coronavirus triggers emergency measures around the world
The coronavirus outbreak spread more broadly around the world, causing more heavy selling in equity and commodity markets worldwide.
South Korea, the biggest hotspot outside China, reported another 571 cases, while Iran, which has been slow to impose travel and work restrictions on its population, reported another 143 cases.
The virus has also reached sub-Saharan Africa, with Nigeria confirming its first case. The northern Japanese island of Hokkaido declared a state of emergency, while quarantines and school closures spread across Germany. Neighboring Switzerland, meanwhile, has banned all public events with over 1,000 participants – meaning the cancellation of this year’s Geneva Auto Salon.
2. Panicked selling in global markets continues, then eases
The panic in global financial markets showed tentative signs of easing, but not before another hefty write-down of risk assets and mark-up of havens.
Asian stock markets fell sharply, while Europe’s bounced off intra-day lows but were still down by anything between 2.2% and 3.2% by midday in Europe, after what is now becoming a regular routine of profit warnings from companies.
Brent crude hit a three-year low before bouncing back above $50 a barrel, after profit warnings from two of Europe’s biggest airline groups that, like many others this week, were all the more concerning because of their vagueness.
The 10-year U.S. Treasury yield fell to a new record low of 1.17% before returning to 1.19%. Gold futures gave up some of their recent stellar gains.
3. U.S. stocks set for lower opening, but off overnight lows
U.S. stock markets are set to extend losses at opening, although with many indicators suggesting that markets are heavily oversold in the short term, some will be hoping for a bounce going into the weekend.
By 6:30 AM ET (1130 GMT), the Dow futures contract was down 217 points or 0.9% at 25,334 points. The S&P 500 futures contract and the Nasdaq 100 contract were both down 0.8%.
One stock likely to be in focus in early trade is Cisco Systems (NASDAQ:CSCO), which – according to The Wall Street Journal – is planning a new round of lay-offs ‘because of global economic uncertainty.’
On the data front, there will be data on personal consumer expenditures and personal income at 8:30 AM ET (1330 GMT).
4. Bundesbank sees virus hitting German economy
The German economy is likely to grow more slowly than forecast this year due to the coronavirus, Bundesbank President Jens Weidmann warned.
“If it comes to an epidemic in Germany then…direct economic effects are to be expected,” Weidmann told a press conference. However, he said there was no immediate need for the ECB to act.
Markets are unconvinced: they’re pricing in another 10 basis point cut in the ECB’s deposit rate after weaker-than-expected inflation numbers from France and Italy this morning. Germany, meanwhile, recorded a surprise drop of 10,000 in seasonally-adjusted jobless earlier Friday.
5. Lira, ruble weaken as Turkey and Russia square off in Syria
The Turkish and Russian currencies weakened after the two countries came closer to direct conflict in Syria.
The ruble fell as low as 67.23 to the dollar, its lowest since January 2019, while the lira weakened to 6.26 to the dollar, a nine-month low. Both have in any case been caught up in the general rout of higher-yielding currencies since the coronavirus oubreak exploded.
Over 30 Turkish soldiers died in an airstrike in the Idlib region on Thursday that reports attributed to the Russian air force, which commands the skies over Syria. Russia is helping President Bashir al Assad’s forces to crush the last remaining pocket of resistance to his rule.