Today's big to-do was a paradoxical bond market rally in response to a much stronger-than-expected jobs report. This wasn't just a case of a compelling behind-the-scenes headline or event stealing the spotlight from the established data. No... markets were obviously ready to make this trade even before the data came out, and were just waiting until the data hit to pull the trigger.
There are certainly clues elsewhere in the financial market. For instance, the same forces that tend to push rates higher after a strong jobs report also typically push stock prices higher. But there, too, we see a paradoxical decline after the data. This offers one of our best clues as it basically suggests financial markets are shying away from future risks and nothing about those risks will be mitigated by a strong labor market in the US.
If we consider that the global financial market is actively trying to adjust for the longer-term impact of the coronavirus outbreak, all of this starts making more sense. For example, multiple financial firms have downgraded China's GDP outlook by several percentage points for Q1 2020, and this comes at a time when the country's GDP growth is already at a decades-long low.
From there, we can consider that China is a much larger cog in the global economic engine than it was in 2002/2003 when SARS pushed GDP appreciably lower. Connecting the dots and carrying the 1, we could easily conclude that no amount of "hope" for improvement in the coronavirus outlook is going to undo the damage that's already been done (and that will continue to be done) to the Chinese economy. From there, spillover to the global economy is a given.
It's not as if markets decided all this in one moment following NFP, but to reiterate a point I often make, and one I made several times this week, NFP day is frequently used as a staging area for new trading momentum. Those trades frequently disregard the implication of the data itself, unless the data stands a good chance to make those trades a bad idea. Think of it like the last chance to fold or play your cards in poker. Since nothing about the US labor market is going to change the global economic fallout, everyone played their cards as planned and suddenly, bonds are alive to fight another day.