This week has been quite the doozy. Recapping oil is down 12% and the Dow Jones is down 11% and we haven’t had Friday yet. Futures are pointing to another 900-point slide on Friday in the Dow on Friday’s open after the biggest one-day points fall ever on Thursday.

Shares on Friday are looking nose-bleed red. The FTSE 100 is set to crash 250 points at the open. Germany’s DAX looks set for a 500-point meltdown.

Wall Street nosed-dived into the close of business with the S&P 500 down 4% and deeper into correction territory. There will be some bumps in the road but… It seems a reasonable assumption that the coronavirus will not be contained so we are on course for a bear market. There are probably going to be some more wild swings today as markets try to put in a bottom after the rapid fall this week. But its hard to see what could provide enough certainty stop fear winning out before the weekend. One thing to keep in mind is that the China PMIs released on Saturday are bound to be dreadful.

Probably our best hope for some relief from the selling in the near-term is that oil prices bounce, lifting energy stocks. That certainly hasn’t happened so far. It has been richly priced tech stocks and oil sensitive energy companies dragging the market lower this week. The FT is reporting that Saudi Arabia is seeking an additional 1M per day cut to oil output from OPEC+. Having waited this long to react, OPEC and its allies will need to cut very deep. They need to counteract the undefined demand destruction caused by the coronavirus

There has been no sign of the uplift in yields we thought might occur. Central banks have so far refused to give any concrete signs they will act against the coronavirus, but markets have understood that to mean a recession is more likely and pushed yields lower. US 10-year yields are down near 1.23% with fed funds futures markets now pricing in a 60% chance the Fed cuts rates in March. If the probability of a March rate cut increases to 80%, that’s a time the Fed will have to openly talk down the possibility. That should be very stocks-negative, dollar- and yields-positive event, were it to occur.

Dollar-yen (USD/JPY), the Aussie dollar and the Kiwi are down heavily in forex markets. The first coronavirus case in New Zealand sent the kiwi down 1% on the day. The pound is holding up after outgoing BOE Governor Mark Carney said the coronavirus could mean a growth downgrade for the UK.

Amazingly amid the turmoil, it has been a rally and a great week for the euro. Germany turning back the pages of history to open the government spending spigots is lifting hopes that European growth is set to improve. The United States is already tapped out after the Trump tax cuts and spending spree so it is possible Germany could spend Europe into better economic performance than the United States in a coronavirus-induced downturn. Some caution is warranted though since there is not yet a consensus in Germany about the fiscal response. Weimar Republic levels of German debt is not a done deal just yet.

Opening Calls:

FTSE 100 is set to open 251 points lower at 6545

DAX is set to open 532 points lower at 11,835

S&P 500 is set to open 63 points lower at 2915