Just a quick thought: They're not normal times, so don't be surprised if normal rules don't apply -- well, not all the time anyway…

ref: - General

It's tough trying to put together something cogent about these plunging markets for any number of reasons. But not least among them is the fact that so extreme are the moves one might want to write about, what you've got say is out of date before you've had time to do it. So maybe one should stick to generalities, not specifics.

Seems sensible… Last night the Dow Jones officially moved into bear market territory, defined as a 20% retracement from the high. Investors were hoping for a boost from President Trump, but in the event were distinctly underwhelmed by what he had to say. Whether or not the travel ban from mainland Europe only served to deepen the sense of foreboding is a moot point, but since we're swerving specifics, we'll just say that the general take was that the President failed to give the impression that his administration had things under some sort of control. It did not help that there were factual errors in the speech, some of which had to be corrected or clarified later.

It's entirely in keeping with Mr Trump's style that he should repeatedly refer to the pandemic as "the foreign virus" or "the China virus". Wherever Coronavirus originated, one can't help feeling that the markets might have gained a bit more in the way of confidence if the President spent more time proving that he was taking bold measures to address what is a global problem and less time bashing everyone else… as is his won't, of course. The S&P 500, the US stock index that many investors and commentators prefer to follow, actually just avoided moving into bear market territory last night but looking at futures markets this morning it's likely to attain that dubious status on the opening today. It's possible that Chinese investors will afford themselves a quiet smile at the exquisite irony of China's stock markets proving so much more resilient than most other global indices.

So anyway, this morning we've got more of the same. Stocks tanking and safe-havens being sought: bond yields lower/prices higher, Jap Yen and Swiss Franc strength. But in these extraordinary times, not everything moves how you would expect them to. At $1,638, gold is barely changed overnight and since its panic-fuelled high above $1,700 in the early hours of March 9th (GMT) the yellow metal has actually performed pretty poorly, not what one might expect while stock markets have been crashing.

Something a bit odd was going on yesterday too, with stocks under the hammer but bonds being sold too… the US 10yr Treasury yield traded as high as 0.88 %. It's back down to 0.69% as we write with government bonds being bought again, but traders need to be aware that normal relationships between different markets can slip out of kilter briefly even if the expected level of correlation (positive or negative) remains intact over the longer view. It's hard to identify exactly why that should happen on any particular occasion. It could be that lack of liquidity in panicky markets fosters exaggerated moves that experience some short-term correction that goes against the overall trend. Or in really stressful times it might be that investors are forced to sell even assets that are performing well in order to meet margin calls elsewhere. Whatever the case, it happens a lot more often when things are fraught and the present time definitely qualifies.

That's it for today… time to strap on the tin helmet once again. But don't forget the ECB's rate decision and policy statement later today. They don't have much ammo left in the locker but we could probably expect them to shave another 0.10% off the deposit rate to -0.60%, and expansion of the current asset-buying programme (QE). We can also expect ECB boss Christine Lagarde to be even more frank than she has been in the past in telling politicians to step up to the mark with fiscal stimulus.

Not too many would argue with that, one might think… but rest assured, even in these desperate times there'll be a few in Berlin and Frankfurt who still don't see things that way.