Volatility has shot up in the recent few days as a fresh coronavirus outbreak in Beijing and rising infection numbers in the United States sent jitters through markets, quashing stocks, oil and riskeir emerging market currencies and spurring safe haven bids on fixed income and the U.S. dollar.
Beijing recording almost 80 new coronavirus infections over the weekend, many linked to what is said to be the largest seafood and vegetable wholesale market in Asia, after weeks of no new cases until last week sparked concerns over a second wave with authorities reinstating tough measures.
This chart shows the VIX volatility index against confirmed COVID-19 cases globally.
Graphic by Ritvik Carvalho
Here’s Mike Dolan’s take:
It shows there really is still nothing more important for macro markets than the trajectory of the virus and shows super sensitivity to any rise in infections associated with economies reopening - there was always likely to be some quid pro quo between people returning to work/school/shops/big gatherings and rising infections - we now face the test of this over the coming weeks and market volatility gauges more than cash indices are the real reflection of that trepidation. Whatever governments do to respond may be trumped by a rise in public fear of going out anyhow - so it matters regardless of lockdowns. On the other hand, China, arguably is acting quickly enough to ensure wider lockdowns are not necessary. Another argument would be that if these scares are contained successfully now, they are still technically part of a second quarter that's already been written off economically. Worrying would be signs of a resurgence in Europe now that many lockdowns and travel bans are being lifted more widely.
Chart by Ritvik Carvalho and commentary by Mike Dolan
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