This is nothing short of chaos and the points we raised in the note of Friday are unfortunately being played out in fast real time before our eyes.
Market Open
We advised of the potential for increasing uncertainty as the financial market reaction to the Virus increases. Unfortunately, developments over the weekend have served to reinforce the viewpoint and as this is being written, just before the opening of the European trading day, it looks like there will be another move lower in markets as the new-flow intensifies.
The two key items to think about this morning are the lock down in Northern Italy – covering the Country’s major financial centre, Milan and its industrial economic region. We can see that the Borsa Italiana and therefore the FTSE MIB are open and functioning at this time. So at least the mechanics of the markets are still in place.
However, the big news has to be related to Oil and the intention of the Saudis to embark on an attritional price war that has caused Oil to drop by 30%. How this affects markets over the longer term is something to cover for a later time. In the short term the price drop has caused to add to uncertainty. Oil firms are in freefall. Oil majors like Royal Dutch Shell are down 30% and second liners like Premier Oil are down by 85% at the opening bell.
This is nothing short of chaos and the points we raised in the note of Friday are unfortunately being played out in fast real time before our eyes.
Bonds are trading higher and we expect Gilt Yields to fall to the zero level and possibly even below zero.
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About the Author
Peter Smart, Head of Investments
01534 488778
Peter has been involved in investment markets since 1985, working within the private client areas of two global banks and for 22 years as the fixed income specialist for the UK Wealth manager, Brewin Dolphin. More recently Peter formed part of the investment team at bridport in Jersey specialising in the provision of specialist, income focussed portfolio’s.