Facing fear

Posted by: Paul Donovan

25 Feb 2020
  • Financial markets reacted to fear of fear of the virus yesterday. The economic damage of the virus is mainly through fear of the virus. Italy's quarantine measures led investors to fear that fear would spread to European consumers. Italy did see an increase in virus-related web searches (as did Switzerland), but the rest of Europe seems calmer.
  • Asian equity markets are basically unchanged overnight (Japan was closed yesterday, and has caught up today). Hong Kong trade data is due – while never normally a focus, investors are somewhat starved of statistics at the moment, and may look to this.
  • German fourth quarter GDP was left unchanged from the initial guess (which was 0% q/q growth). German growth should be lower than other countries because of its demographics, but 2019 was a difficult year. Trade taxes hit German investment goods exports, and German automakers have had better years.
  • US consumer confidence data is due. Big news stories can affect sentiment opinion polls. However, domestic politics may be the big story in the US. Partisanship could encourage Republicans to say everything is wonderful and Democrats to say everything is terrible, when surveyed for their views. The Fed's Clarida is due to speak.

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