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Fear returns to the markets with a vengeance – as panic

At first, market participants were reassured by mounting evidence that the epidemic was being brought under control in China and this drove risk assets to new highs. Then fears intensified when it was confirmed that the virus had spread to other regions, especially Europe, leading to a sharp fall in stock markets and a retreat to the most secure assets, bonds in particular.

If we take a closer look at market behaviour since mid-January...