Mr Minerd said technical analysis suggests that there should be support around 2600 on the S &P 500, but in a recession scenario a level closer to 2000 could be the ultimate outcome.

The US listed shares of BHP fell 16.5%, Rio dropped 9.4% and Atlassian ended 7.9% lower.

The yield on the US 10-year note plunged 22 basis points to 0.54% as of 4.31pm New York time; they fell as low as 0.318% in early trading.

The VIX leapt 30% to 54.46 as of 4.14pm in New York.

"Markets are capitulating as the virus arrives in the US, the heart of global finance. Short-term volatility will stay high, but over 1-2 months we'd add risk in carry plays," said Bank of America's David Hauner.

The situation is worse in Europe where late Monday (Tuesday AEDT) Italy effectively locked down the entire country.


RBC Capital Markets' Tom Porcelli said the US Federal Reserve should cut rates again. "Given where Treasuries are sitting, nobody should be surprised if the Fed came out and cut 100bps to the 0-0.25 lower bound. As anyone who knows our work well appreciates, we think that cutting rates will have virtually zero economic impact in this backdrop.

"But, if cutting rates to the ZLB allows the Fed to show they are at 'max help' and places more of a burden on fiscal to step in, then they should get on with it," Mr Porcelli said.

According to the WHO's March 9 situation report, global confirmed cases reached 109,578 and 3809 deaths. Including China, the virus was now confirmed in 105 countries.

According to Johns Hopkins, as of 9am AEDT, the global case tally is 113,584 with 3996 deaths. In terms of countries, China leads with confirmed cases followed by Italy, South Korea, Iran, France, Germany and Spain. The US has 607 cases with 22 deaths.

As for Australia, Johns Hopkins puts the confirmed case number at 91 with 4 deaths; 21 people have recovered.

Ray Dalio says the economic impact of the coronavirus outbreak will require a coordinated fiscal and political response as central banks run perilously low on ammunition.

The Fed's limited ability to cut rates and carry out quantitative easing won't be enough to counteract the fallout from the spreading virus, the billionaire founder of Bridgewater Associates wrote in The Financial Times on Monday. Affected people and companies will instead need financial support to cope with temporary dips in their incomes, he said.

"Anyone who is knowledgeable and plain-speaking will tell you that the negative economic impact of the coronavirus outbreak will probably be big, that monetary policy will be of little use to counteract it, and that coordination between political leaders and central bankers is both essential and unlikely," said Dalio.


Charles Schwab's Liz Ann Sonders agrees: "Lower rates aren’t a vaccine. Lower rates can’t unclog the global supply chain. Lower rates can’t entice people to fly or cruise again. Lower rates can’t keep the virus from spreading or incidents of contraction or death from rising."

Two key reasons for the plunge in equities, according to Ms Sonders: investor sentiment had been stratospherically optimistic in January and, the dominance of machine-driven trading (algorithmic- and quant-driven strategies) can exacerbate and momentum in both directions; as well as condensing time frames.

President Donald Trump will meet with Treasury Secretary Steven Mnuchin and other economic officials later on Monday (Tuesday AEDT) to review options, including paid sick leave.

Trump, who has staged his re-election campaign in large part on the strength of the US economy, on Twitter blamed the economic fallout on the media and the fight over oil prices between Saudi Arabia and Russia.

In a note, BlackRock said it was time for policy to go direct. "A decisive and pre-emptive policy response is essential given the uncertainty around what will likely be material near-term disruptions due to the coronavirus outbreak.

"For the most part these measures will be fiscal in nature – and some will require coordination between fiscal and monetary authorities. Monetary policy should focus on preventing an unwarranted tightening in financial conditions and ensure the functioning of financial markets.

"Central banks going it alone with interest rate cuts risk wasting precious policy ammunition. We believe decisive policy action now would help avoid opening the door to more radical ideas and uncontrolled fiscal spending."

Today's agenda


Local: NAB February business conditions and confidence

Overseas data: China February PPI and CPI; Euro zone fourth quarter GDP

Market highlights

ASX futures down 273 points or 4.8% to 5432 near 7.10am AEDT

AUD -0.7% to 65.87 US cents

On Wall St: Dow -7.8% S &P 500 -7.6% Nasdaq -7.3%

In New York: BHP -16.5% Rio -9.4% Atlassian -7.9%

Tesla -13.6% Apple -7.9% Dow Inc -21.7% Chevron -15.4%

In Europe Stoxx 50 -8.5% FTSE -7.7% CAC -8.4% DAX -7.9%

Nikkei 225 futures -2.2%

Spot gold +0.1% to $US1675.91 an ounce at 4.26pm New York time

Brent crude -23.7% to $US34.54 a barrel at 4.16pm New York time

US oil -25% to $US30.96 a barrel

Iron ore -2.5% to $US87.96 a tonne

Dalian iron ore -2.7% to 640 yuan

LME aluminium +0.1% to $US1687 a tonne

LME copper -1.3% to $US5535 a tonne

2-year yields: US 0.39% Australia 0.42%

5-year yields: US 0.48% Australia 0.40%

10-year yield: US 0.54% Australia 0.61% Germany -0.86%

US bond yields near 4.30pm New York time

From today's Financial Review

PM's crisis call to big business Scott Morrison has called on companies to keep workers employed during the economic downturn and virus crisis, warning that they will be forever judged on how they respond in the next six months.

IMF warns of breakdown in financial systems, workplaces: The multilateral fund is ringing alarm bells about sluggish government responses to the intensifying economic fallout from the coronavirus outbreak, urging policy solutions to avoid lasting damage.


Chanticleer: Oil shock has a bear hunting investors: The coronavirus panic has been compounded by an oil shock that will spill into credit markets. There are bargains, but investors will struggle to outrun this bear.

United States

Liz Ann Sonders @LizAnnSonders: "Russell 2000 in bear market (down 24.6% from its August 2018 high; & nearing low from December 2018)"

Mohamed A. El-Erian @elerianm: "While levels are still bad for most investors, some stabilization in #markets now Fascinating to see where the balance comes out between short covering/bottom fishers with vol appetite and distressed selling by those too shell shocked to sell this morning and feeling overextended"

Bespoke @bespokeinvest: "US stock market cap now down $6.4 trillion since 2/19. Only up $5.2 trillion since Election Day 2016 now. So more than half of post-Election gains now gone."

Europe

The euro-area economy may be headed for its first recession in seven years as the coronavirus outbreak takes an increasing toll on businesses and consumer confidence.


With Italy attempting a sweeping lock-down across its richest areas and infections nearly doubling in Spain, economists at Morgan Stanley and Berenberg expect euro-zone gross domestic product to shrink in the first half of the year. In France, the central bank now sees output barely growing in the first quarter.

French Finance Minister Bruno Le Maire highlighted his concern, saying Europe needs a "call to arms" to defend the already-weakened economy. The outbreak has disrupted companies' supply chains, forced airlines to cut capacity and prompted shoppers in some countries to stockpile essential food items. The Spanish city of Vitoria ordered a shutdown of all schools for 15 days.

The downbeat assessments come amid a meltdown in financial markets not seen since the height of the global financial crisis in 2008. It marks a grim start to the week for European Central Bank policy makers, who meet in Frankfurt and may be forced to lower interest rates and step up bond purchases.

"I want a strong, massive, coordinated response," Le Maire said on France Inter Radio as the central bank slashed the outlook for the country's economic expansion this quarter to 0.1% from 0.3%.

"We should work on a stimulus plan with fiscal and budgetary measures, and tax cuts, so that when the epidemic crisis is over we can relaunch the economic machine," he said.

Asia

Hong Kong stocks tumbled on Monday, posting their steepest daily fall in more than two years, as fears over the economic impact of the global coronavirus epidemic were exacerbated by a crash in oil prices that battered financial markets around the world.

The Hang Seng index fell 4.2%, to 25,040.46, while the China Enterprises Index lost 4.5%, to 9,984.44 points.


Both indexes marked their biggest daily fall since Feb, 2018.

Stocks fell across the board, dragged down by energy companies. The Hang Seng energy subindex crashed 10.9%, logging its worst session since late 2008.

Japan's Nikkei share benchmark has tumbled to 14-month lows on rising fears the widening reach of the coronavirus epidemic could severely disrupt the global economy.

The Nikkei shed 5.1 per cent to 19,473.07, its lowest closing level since January 4, 2019. It marked the biggest one-day fall since June 24, 2016.

"The markets have moved into a new phase," traders said.

Currencies

NAB's review of FX overnight: "...the big news over the past 24 hours was yesterday’s flash crash during our afternoon session. Intense JPY cross rate moves look to have been the trigger for multiple mid-session ‘flash crashes’ (Japan retail FX flow suspected but not proven) which saw AUD down 5% at one point ( to a low of 0.6313), NZD down to 0.6014, USD/ZAR up 6% and USD/MXN up 9%. All these pairs have recovered all if not most of their losses suggesting this was indeed a flash crash (or in case of JPY melt up) event, we suspect the plunging oil prices provided the catalyst for levels where stops would have started to be trigged.

"Of note however, while both antipodean currencies have made strong gains overnight with the NZD up ~1.7% to 0.6340 and the AUD up ~1.2% to 0.6587. For now the repricing of US yields is a downward force on the USD, we think this will eventually play its course and with the global downturn tacking a turn for the worse we still think the AUD and NZD look vulnerable to further declines, specially via the likely decline in their respective terms of trade.


"JPY has managed to retained about half of its initial gains against the USD. Yesterday pair fell from around ¥105 to a low of ¥101.57 during Asian trading time, but then overnight it traded down to a low of ¥101.19 before recovering to ¥102.31 where it currently trades, as we have been saying for quite some time, JPY remains the pre-eminent safe-haven currency."

Commodities

Copper prices tumbled to their lowest level in more than three years.

Three-month copper on the London Metal Exchange (LME) fell as much as 3.1% to $US5433 a tonne, its lowest since December 2016, but later recouped some of these losses to $US5535 in final open-outcry trading, down 1.3%.

A wave of selling in copper did not materialise even though it broke below a key technical area between $US5450 and $US5500, said Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen.

"We are looking at a line in the sand that has held for three years and so far we haven't really seen any major appetite for accelerated selling below that point," he said.

"Half of demand comes from China and there are increased expectations that some kind of bazooka will be released in order to stabilise growth and it seems the market is holding on to that belief."

A spike in volatility is also likely to have forced some funds to lighten up on exposure, Hansen added. "The funds that normally would be selling into this break, some of them have been potentially buying (back short positions) in order to cut their exposure because of developments in some of the other markets."


LME aluminium closed up 0.1% at $US1687 a tonne after touching $US1644, the lowest since October 2016.

Australian sharemarket

ASX plunges 7pc in worst day since the GFC: The ASX endured its worst day since the peak of the GFC as the threat to consumption from the virus and collapse in oil prices threw markets into chaos.

Capital-hungry growth stocks vulnerable in market correction: Share market darlings that have relied on the capital markets for financing may be about to face a moment of truth.

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