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The markets bounce back after yesterday’s Black Thursday rout

March 13, 2020, 10:17 AM UTC

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Good morning, everyone. Ok, take a deep breath. After the Black Thursday bloodbath, today we have…a modest bounce.

Where are these green shoots appearing? Let’s take a look.

Markets update

We start in Europe, which suffered its worst day for equities-trading ever on Thursday. If you think the Wall Street carnage was bad, cast an eye on these eye-watering numbers: The FTSE in London cratered by 11%. Germany’s Dax yesterday plummeted 12%. Italy bombed by 17%. You get the idea.

But at the open today, the European bourses were in the green. Even battered Italy was on the up. It may help that the Italians have placed a partial ban on short-selling, joining South Korea and Spain. Germany may do so as well. You may remember this playbook from the low point of the 2008-2009 financial crisis.

Before we go to the U.S., a quick roundup of Asian stocks. They’re falling the furthest today, a reaction to yesterday’s routs in Europe and the States.

Now, as I type, the U.S. futures are set to open higher, with the Dow up above 900 points, or 3.4%, on hopes Congress can patch together a coronavirus stimulus plan. That’s nice, but hardly enough to chip away at yesterday’s 2,352-point fall, it’s worst day since Black Monday in October 1987.

Scott Wren, senior global market strategist at Wells Fargo Investment Institute, told Fortune‘s Anne Sraders he’s looking beyond the ups and downs of the indices. “Consumers sitting at home and not out spending money because they fear catching the coronavirus is the ultimate negative outcome,” he said, an anxiety that could spread into the housing market, and the wider economy.

For a while there yesterday, these markets were beginning to take on a sell-everything, panic mentality—no surprise when regions across the world enter bear territory so quickly, and all at once. Just look at the situation with gold. The classic safe-haven sold off sharply on Thursday, along with commodities, oil and equities. That kind of coordinated sell-off isn’t common; it happens when big players are forced to liquidate all positions, even the ones generating a decent return, to meet margin calls. Oh, and bitcoin bombed too, its worst sell-off in seven years. Read into that what you will.

This morning, the dollar and gold are down slightly. Crude is up, in line with the U.S. futures.

As we do every Friday, let’s look at the big figures moving markets.

***

By the numbers

28.3. The Dow has fallen 28.3% since its Feb. 12 high of 29,551, which was within 449 points of 30k. Don’t look now, but, as of yesterday’s close, the benchmark is a mere (on an absolute basis) 1,374 points, or a drop of 6.5%, from erasing all the gains from the Trump era. Here’s an updated table looking at the recent rise and fall of the Dow.

Single digits. China is reporting some good news today. The numbers are a little bit delayed, put show promise. As of March 12, there were just eight new infections and seven new deaths, down from 15,000 per-day just one month ago. The Chinese put into force some of the most stringent lockdown efforts anywhere in the world, a move that may prove to be a kind of model in hard-hit regions. I know all about that here in Italy, where the outlook is not as rosy. There are 15,000 cases here, and more than 1,000 deaths.

Nothing. The ECB stunned markets on Thursday by not cutting its benchmark interest rates. You could argue the central bank had no room to do so, seeing as rates are already in negative territory. But the move, combined with some tough-love remarks by ECB chief Christine Lagarde about not planning to bail out any virus-ravaged member states (she’s looking at you, Italy), absolutely obliterated the European markets Thursday afternoon, and pushed the spread on Italian bonds into the red. The move (or lack of one) underscored investor concern that central banks have far less ammunition in this crisis to goose the economy, and the markets, than they did in the financial crisis of 2008. Look for this theme to play out in the coming days and weeks.

Postscript

Yesterday, I mentioned the piccolo sacrificio (small sacrifice) the Italian government is asking all of us here to endure during a few weeks of lockdown. We can still go out, get some air, and buy supplies. And you can still get to your job in the morning if you work in a vital sector that cannot be shut down.

But police are cracking down on some frivolous movement. I heard a local radio news bulletin this morning that thousands of Italians have been fined in recent days. The offenses range from meeting others for an aperitivo to gathering in groups in parks and elsewhere. It’s not clear whether I can get on my bike to pedal around the trails here without getting hassled. We await further guidelines from The Ministry of Fun.

But, it’s important to note, daily life goes on here. The measures at least seem to be preventing panic-buying, no small feat. Here’s a picture from my local supermarket in Rome this morning.

Compare that with what my brother, in New Jersey, sent me last night.

I’ve heard of no shortages here. But if they ever run out of prosciutto di Parma here, we’re in trouble.

Have a good weekend, and stay safe.

Bernhard Warner
@BernhardWarner
Bernhard.Warner@Fortune.com

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Today's reads

Buyback. Japanese tech investor SoftBank Group, bowing to pressure from a leading activist shareholder, plans to spend up to $4.8 billion buying back up to 7% of its own shares. SoftBank’s second major buyback in as many years is a sign of the company’s attempts to shore up a market capitalization that for years has languished below the value of its accumulated investment holdings, The Wall Street Journal reports.

Take cover. With recession now looking increasingly likely, it’s time to batten down the hatches and get your personal finances in order. Think about right-sizing your spending habits and have some ready money you can fall back on in an emergency, suggests Ben Carlson, director of institutional asset management at Ritholtz Wealth Management. 

Wedding washout. Coronavirus is taking a heavy toll on the hundreds of thousands of small businesses that support the $300 billion wedding industry worldwide. Many of the florists, caterers and cake bakers are mom-and-pop organizations that are left scrambling as couples postpone, cancel, or put a halt to planning for their big day, says Stephanie Cain in Fortune.

Market candy

Quote of the day.

"We're a small box shop close to your home. They just don't want to travel to the big box [stores].”

Those are the words of Todd Vasos, CEO of discount chain Dollar General, one of the few companies that thinks it will benefit from the coronavirus epidemic on the grounds that its small, local stores will attract shoppers looking to practise recommended “social distancing” by avoiding large, crowded stores.