The penny finally dropped. Once cases of Coronavirus infections accelerated outside China, specifically in South Korea, Iran and Italy, markets woke up to the likely impact on global economic growth. It began to fear the worst. In the last six trading days of the month, the Dow Jones dropped 13 per cent, recording its fourth-largest percentage fall over six days in 75 years. The only worse periods were the October 1987 crash, September 2011 (9/11) and October 2008, (the financial crisis). The S&P 500 fell 8.4 per cent in February but, on an intra-day basis, it plunged 15.8 per cent from its 19 February all-time high.
Apart from government bonds, there was really nowhere to hide. The 10-year US Treasury was in demand and rose so that its yield fell to 1.13 per cent, its lowest ever. With markets seeking safety, it has subsequently fallen further, to below 1.0 per cent. Major equity markets were thumped. The Nikkei 225 was down 8.9 per cent as Japan looks to be moving into recession, the DAX was down 8.4 per cent, the CAC 8.5 per cent and Russia 14.3 per cent. In the UK, the FTSE All-Share (Total Return) Index fell 8.9 per cent, with Aim a little worse at 9.3 per cent down and the FTSE Mid Cap a little better, falling 8.6 per cent.
Commodities were hit on growth fears and none more so than oil. Brent crude fell 11.6 per cent to trade at $50.12 a barrel. A far cry from January’s brief visit above $70 a barrel. Zinc and nickel were down, but copper managed to gain just 0.9 per cent. After a poor last day of the month, gold ended the month flat. Selling of gold on Friday 28 February seems to be down to “leveraged traders” receiving margin calls in falling markets. This led to forced selling of liquid gold exposure to raise the required cash. I think the underlying argument for having an exposure to gold remains intact and, if anything, is now more robust.