Share markets tanked in overnight trading as equity investors finally moved into line with other markets. European and US indices fell by 3% to 4%. Crude oil dropped 4%, and base metals fell. In contrast safe haven markets extended recent gains. US ten-year bonds traded down to 1.36%, and thirty-year bonds hit their lowest point ever at 1.83%. Gold lifted towards $1,700 an ounce, and the Japanese yen gained a big figure.
Significant viral outbreaks in Japan, Korea and Italy raised pressure and forced investors to acknowledge both supply and demand shocks. The disruption to supply chains if countries close borders to contain outbreaks could see global trade grind to a halt.
Strong rallies in bonds and gold over the last two weeks reflected growing worry about the economic impact of the Covid-19 virus. Many share markets hit all-time highs over the same period, despite these clear warning signs. An important driver of the overnight damage in stocks was the sharp reversal in sentiment from complacency to concern.