A vision is the fuel of financial markets. Future milestones/visions could be a new product engineered from AI, sustainable growth targets and additional green economic activity, a potential trade deal that brings a more efficient use of labor and capital, the feeling that economic activity will be boosted by a prolonged monetary policy easing and new rounds of fiscal spending. Europeans announced their green economy agenda on January. Japan was already feeling the benefits of the recent fiscal package. Macro figures were improving and the consensus during the latest WEF has been that the global 4Q19 slowdown, is a thing of the past. The vision was not convincing (it has never been) but the feeling was optimistic.
Coronavirus headlines that followed this year’s WEF, changed the agenda. (a) Fear (b) risk-off (c) digesting the data, i.e. recognizing that the outbreak is not exponential and that the mortality rate is low, recognizing the prompt measures of the Chinese government, were the sequential phases of the market participants’ response. Currently markets are questioning the accuracy of published data.
Cities being shut down, patients being violently detained and snowmaking trucks participating in the disinfection program in the city of Wuhan, do not match with the confirmed cases and confirmed death count reported. Markets began to price the possibility that China is reporting wrong numbers, or the Chinese rulers are using the outbreak as a chance to tighten their grip.
Macro releases: The week began with an unexpectedly high reading of the Chinese inflation. No more market moving releases are included in the today’s economic calendar.
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