Tighter coronavirus lockdown concerns rattle the global markets

Good morning, Bull Sheeters. The coronavirus death toll continues to climb, now nearing 34,000 around the world. Lockdowns are being tightened. New stimulus measures are in the works.

What impact is this having on the global markets? Let’s check in.

Markets update

China cut it prime bank-lending rate on Monday and injected 50 billion yuan ($7.1 billion) into the banking system. The stimulus measures, however, failed to lift markets in Shanghai or Hong Kong. Japan’s Nikkei is down too. Over the weekend, the country recorded a new spike in coronavirus infections. Not long ago, the media was wondering: how the heck did Japan manage to avert this global killer?

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Continuing our global tour of markets, the major bourses in Frankfurt, Milan and Paris all opened in the green, before quickly sliding into negative territory.

The coronavirus crisis is dividing Europe over the question of how to pay for the staggering bailout plans in the works. Nine countries, including hard-hit Italy, Spain and France, are in favor of EU-wide “corona bonds.” The Germans, true to form, are unconvinced it’s a good idea. Meanwhile, the combined death toll in Spain and Italy climbed above 3,000 over the weekend.

Across the English Channel, Fitch Ratings cut Britain’s credit rating. The one-two punch of coronavirus and Brexit forced Fitch to downgrade the U.K. outlook to negative.

London’s FTSE opened in the red this morning.

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As I type, the Dow and S&P 500 are both poised to open in the red as coronavirus fears deepen. Over the weekend, Dr. Anthony Fauci, a chief medical advisor to the White House, warned the U.S. could see millions of coronavirus cases and over 100,000 deaths. President Trump seemed to take those words seriously, extending the wholly voluntary social distancing guidelines through April 30.

So much for back-to-normal by Easter.

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Elsewhere, the dollar is climbing again, snapping a four-day slump. Gold is flat, and oil is tanking. WTI crude fell below $20 per barrel at one point today, hitting its lowest price since November 2002, as the Saudis and Russians remain miles apart in their dispute about how to manage the collapse in demand.

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Last week, the markets cheered stimulus packages from Washington to Berlin. This week, the news flow will no doubt be less cheerful. The U.S. jobs report comes out Friday, and the unemployment claims tally will be revealed on Thursday. Both are pointing to record numbers of Americans out of work.

That means we’re unlikely to see a repeat of last week. The S&P 500 climbed 13.6% last week, and that’s despite sliding by 3.4% on Friday. The Dow actually outperformed the S&P 500. But the S&P still managed to notch, at one point, its best three-day run since 1933.

Let’s go inside the numbers.

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Barely a dent

As today’s chart shows, some of last week’s top performing S&P sectors—industrials, energy and financials—have been among the worst performers of 2020. In a lockdown economy, health care and consumer staples are the most likely to outperform the larger index. Energy and financials, in contrast, probably won’t make a sustained recovery until people get out of their homes, reopen their businesses and start traveling again. Who knows when that will be?

You can see that uncertainty reflected in the red bars. Energy is down 52.3% year-to-date. Financials are down 31.6% in that period. Consumer staples (-15%) and health care (-16.6%), while down significantly YTD, are outperforming the broader S&P 500 (-22%) in that period.

Postscript

If you manage to get out of the house, you’re bound to hear new coronavirus stories. That’s what happened on Friday when my wife took our daughter for her scheduled day-hospital visit. A kidney transplant recipient, my daughter gets poked with needles and weighed and measured at least once a month at the nephrology unit at the children’s hospital here in Rome, Bambino Gesu. These visits fill me with dread and they renew my faith in humanity. Dread that her creatinine level will spike. Admiration for the docs and nurses and parents who soldier through an ordeal that seems to have no end in sight. I marvel at the toughness of these kids.

Because of coronavirus contagion fears, the hospital is now scheduling the visits in small groups—no more than four or five families per day. Across the hall, the dialysis sessions are broken into more shifts with fewer kids. They start early in the morning and end late in the evening. You can see the strain on everyone’s faces.

Meanwhile, all transplants—the news everyone is waiting for—have been paused. They’re not doing living-donor transplants because of the heightened risk of coronavirus infection, and they’re no longer getting any donor organs from the overwhelmed hospitals around the country. In fact, a half-million non-urgent surgeries have been postponed around the country since Italy went into lockdown less than one month ago, health officials estimate.

It means more lost time for those kids on dialysis. It’s hard to fathom how they’ll work through the backlog when things return to normal.

It’s a reminder, to me at least, that there are fates far worse than being confined to a shelter-in-place lockdown.

Stay healthy, everyone. I’ll see you here tomorrow.

Bernhard Warner
@BernhardWarner
Bernhard.Warner@Fortune.com

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Today's reads

How long does a bear market run? After Friday's swoon, this is the question again on the minds of most investors. Fortune's Jen Wieczner goes to the history books to chart out how long bear markets tend to run, how deep they tend to drop, and how long you should expect to wait before the next bull market arrives. There have been some relatively benign bear markets (1990) and some real bruisers (the dot-com bubble burst of the early aughts). 

Sell the rips. Buy the dips. That's the somewhat simplistic programming logic that powers some high-speed trading algorithms, which are, in general, absolutely cleaning up these days. Turns out the markets volatility we've seen in recent weeks has been a boom for high-speed trading. According to the Wall Street Journal, Virtu Financial Inc., one of the largest high-speed trading firms, is on pace for its best quarter since going public five years ago. It expects trading income to top a half-billion dollars this quarter.

Nationalize payrolls? Such a radical stimulus plan is a non-starter in the U.S. But it's about to go effect in a series of European countries in which the government will cover all or most of the pay checks of millions of out-of-work citizens. “If you can tide firms over and thereby reduce the severity of bankruptcies and firings, you can expedite the return to normal,” a Danish economist argues in the New York Times.

Market candy

Quote

“What the older professionals were saying was, when the market does this, you should look at it like when Macy’s puts stuff on sale. You have the opportunity to buy good stuff cheap. And that’s eventually what turns the market around.”

Judith Villarreal, general counsel and chief compliance officer for CoreCap Investments, recalls that crazy day in October, 1987—Black Monday—and what she learned from the event. There are a number of excellent take-aways in Erik Sherman's insightful article on Fortune.com about what those in the trenches learned from the past three bear markets.