HUGE spike in new coronavirus cases spooks markets
Overnight, Chinese authorities announced 14840 new coronavirus cases, a huge spike from the approximately 2000 additional cases seen the day before. In an immediate reaction to the news, markets went into a mild risk-off mode. Stocks, commodities such as crude, AUD, NZD, CAD and EMFX have all been getting hit. Havens assets such as JPY, CHF, gold and bonds have all been on the front foot. USD will likely also remain support by the risk-averse flows.
But don’t hit the panic button yet…
The large spike in the number of new cases was largely due to a methodological change in the way cases were being counted. CT scans have been used in recent weeks to diagnose patients amid a shortage of the usual RNA testing kits, and diagnoses from these tests were counted in the official number for the first time last night.
Of those 14840 "new" cases, 13,332 were actually old cases, meaning that “only” 1508 new cases (on the old methodology) were added yesterday. This is a decent rate of decline and should underpin sentiment for now, even if the headline itself did trigger some risk off nerves.
However, as some have pointed out on social media, the slowdown in the number of newly diagnosed cases of coronavirus observed in recent days may be more to do with this shortage in RNA testing kits, as opposed to a slow down in the actual spread of the virus. Now that we have CT tests, this shortage of testing equipment should be less severe, and markets will be hoping to again observe a trend of a falling number of newly diagnosed cases every day.
Indeed, US press was today reported that China may be under reporting the true number of coronavirus cases by some 100k; if this turned out to be true, you could expect HUGE risk-off flows to ensue.
Elsewhere, WHO has continued to emphasise the fact that developing countries, namely in places like Africa and Indonesia, remain particularly vulnerable on account of their poor health care systems. Neither region has reported any cases yet, despite having close travel links with China. Maybe outbreaks have already begun in these areas, and are as of yet undetected.
Clearly, substantial risks remain and we will be ALL OVER this theme in our analysis moving forward.
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