Welcome to Thoughts on the Market. From London, I'm Andrew Sheets, Chief Cross Asset

Strategist from Morgan Stanley.

And I'm Ellen Zentner, Chief U.S. Economist sitting in New York.

And on this special edition of the podcast we'll be talking

about the impact of the coronavirus and escalating oil market tensions on the

global economy and markets. It's Tuesday March 10th at noon, eastern time.

As we're recording this, extreme market volatility is continuing.

Yesterday, global markets reacted strongly to an expanding coronavirus outbreak and tensions among oil exporters.

Andrew, I think maybe we should start with the catalyst first and then we can talk about

what it could mean for the U.S. economy and markets elsewhere and what tools the Fed and other central banks have as well as the fiscal

tools governments could apply.

I think correctly as you mentioned there were really two factors that contributed to the

acute market reaction we had yesterday. The first was we had

travel restrictions implemented in the north of Italy which have since been

expanded throughout the country that I think have really thrown into stark relief,

how serious this issue is and I think is also kind of brought into more focus the

fact that this is going to be a long-running issue in both Europe and the US

over the next several weeks and even even months that the market's going to need to deal with. the We've had a really sharp weakness in oil prices over the last month.

That's driven a really big change in strategy from Saudi Arabia, which had been

restricting its production, but has over the weekend announced it was going to increase that production quite dramatically

and that drove a really historic drop in oil prices, the largest one day drop in oil prices

since 1991. So you had an increased focus on the coronavirus, this increased shock to markets from this very big drop in oil,

...