Weekly Market Update

Author : Rachel Poole
Date : January 25, 2020

Market Action

Global equities saw little change this week while the opposite can be said for the yield on the US 10-year Treasury note. Investor concern over the rapidly spreading coronavirus outbreak which could inhibit global growth sent the yield on the US 10-year Treasury note down 14 basis points to 1.70%. The price of a barrel of West Texas Intermediate crude oil also fell, declining $4.50 to $54.50. Volatility, as measured by the Chicago Board of Options Exchange Volatility Index (VIX) increased from 12.3 to 13.5.

Wuhan, China, a city the size of London, has been the center of a coronavirus outbreak. As of Friday, the virus had killed 41 people and over 800 confirmed cases had been reported. While the World Health Organization has not declared the outbreak an international emergency yet, the virus has spread to seven countries outside of China including Thailand, South Korea, France, and the United States. Asian markets have fallen over the last few days as investors worry that the outbreak may worsen and that Chinese shoppers will stay home for the Lunar New Year holiday. Some estimates suggest the epidemic could shave 0.5% to 1% from China’s projected 2020 growth rate of 6%.

World leaders met in Davos, Switzerland this week for the 50th World Economic Forum. For the first time, environmental concerns and inequality discussions took center stage. Many businesses announced plans to sharply cut their carbon footprints, marking a step towards climate-friendly business. A more wholistic approach to business has been promoted, one in which corporations focus their priorities and profits on not just shareholders but stakeholders such as employees, customers, suppliers, and communities.

France and the US reached a short-term truce at the World Economic Forum in Davos, Switzerland this week. The two countries had been spatting over the taxation of digital services. The Organization for Economic Cooperation and Development (OECD) plans to unveil a universal cross border system, allowing governments to tax companies that do not have physical operations in their countries. France was ready to move ahead with its own digital tax while the US was preparing a round of retaliatory tariffs. While in Davos, US President Donald Trump repeated that he will place tariffs on European auto imports if the European Union does not reach a trade agreement with the US.

On Friday, hundreds of thousands of people marched through Baghdad, Iraq in protest of the US military presence in their country. Protesters are calling for all US troops to leave Iraq. Though Iraq’s parliament voted to expel the US military from the country following the Iranian attack on two US bases in Iraq, the Trump administration has said it does not intend to withdraw troops.

At least 111 people were killed this week in a missile attack on a military training camp in Yemen. The Yemen government has blamed the rebel Houthi movement for the attack. The event is one of the deadliest since Yemen’s civil war escalated due to foreign intervention five years ago.

The International Court of Justice (ICJ) unanimously ruled that Myanmar must take emergency measures to prevent a genocide of the Rohingya Muslim minority group and preserve all evidence of possible genocide. More than 700,000 Rohingya live in refugee camps in neighboring country Bangladesh, while hundreds of thousands more remain in Myanmar. The government of Myanmar denies that the widely documented killing and persecution of the Rohingya by Myanmar’s military amounts to genocide.

Updated Market Return Figures

What Could Affect the Markets in the Days and Weeks Ahead

Britain will officially leave the European Union (EU) next week, beginning the 11-month period during which a new trade agreement will have to be struck between the United Kingdom and the EU. Also next week is Mark Carney’s last Bank of England meeting as governor where he will announce if the bank will be cutting interest rates.

The impeachment trial of President Trump is in full swing. Democratic House managers have concluded their presentation and the president’s defense will begin presenting on Saturday.

President Trump says he will soon release his Middle East peace plan. He has invited Israeli Prime Minister Benjamin Netanyahu and his rival, Benny Gantz, to the White House next week to discuss the plan. In response to this announcement, Palestinian officials reiterated that they will treat any American proposal as “dead on arrival.”

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