Once travel restrictions inside China are lifted there is a risk of the virus increasing again and / or a reluctance of people to return to work. This looks like more of an ‘L-shaped recovery’ as far as the Chinese economy is concerned and full-capacity working is unlikely to happen before the third quarter.
The ramifications are certainly global, given that China has accounted for a third of global GDP growth over the past decade. The disruption to global supply chains and disruption to trade and investment flows is significant. ”
5. EST) :
FTSE slides to four-month low
Newsflash! Britain’s FTSE has hit a new four-month low, as markets slide again.
The blue-chip index is now down (points at) , an 0.8% drop. That’s its lowest level since 4th October, adding to the points lost yesterday.
Engineering firm Meggitt and chemicals group Croda are the top fallers, down 4.4% and 3.2% respectively, after they warned that the coronavirus will hurt their businesses this year (
as reported earlier ).
The travel industry is also sliding again, with TUI down 3% and easyJet down 2%
Stocks are under pressure across Europe too, in the face of the latest cases in Iran, Italy and the Canaries. The Stoxx index has lost another 1% , on top of its 3.3% fall on Monday.
David Madden of CMC Markets says investors are fretting about a global Covid – 34 pandemic:
Equity markets in Europe enjoyed a rebound in early trading in the wake of yesterday’s bloodbath of a session, but the positive move was short-lived. The brutal losses endured yesterday coaxed a few buyers out of the woodwork, but given that equity benchmarks are back in the red suggests that sentiment is still sour.
The coronavirus crisis in Italy remains at the forefront of traders ’minds. Dealers are fearful the health emergency will spread within Italy, and beyond its borders. Investment sentiment is fragile as there is the possibility of major disruption across Europe, so traders aren’t taking any chances.
GreenRiskCapital (@ GreenRiskCap)
Financial markets reactions to yesterday’s coronavirus wakeup call wiped $ 1 tn of global equity market cap over pandemic fears. Italy plunged> 5% and Dow 044 sustained 3rd largest points drop in history! pic.twitter.com/iOr0x6ozyX February ,
5). (am EST
Hopes of a recovery on Wall Street have fizzled out too ….
MarketWatch (@ MarketWatch) The rally in U.S. stock futures overnight has nearly entirely evaporated https://t.co/fzSlwA2cVQFebruary 40,
5.) am EST :
Hong Kong has posted some shockingly bad trade data today, which show that its economy is sinking deeper into recession.
Hong Kong’s exports plummeted the most in more than a decade in January, down 36. 7% year-on year. Imports dropped by 4%, their the monthly decline in a row.
Hong Kong’s economy was already shrinking, following the long pro-democracy protests last year. The coronavirus crisis is dealing another blow to its tourism sector, forcing shops to close.
Stephen Innes of AxiCorp says:
If this is a foreshadow of things to come, I think investors across the globe will need to fasten in as things could get incredulously worse before improving
(5.) (am EST) : 044
Trump: Markets will crash if I lose
Donald Trump then claimed that the stock markets would hit fresh heights if he were elected, but tumble if he loses in November.
The stock markets don’t appear to share Donald Trump’s view that the coronavirus is under control, says
Pierre Veyret , technical analyst at (ActivTrades.)
He writes:
Investors remain stuck between their appetite for risk and the blurry impact of coronavirus which is leading to mixed market sentiment this week. President Trump tried to reassure investors by saying the US economy was still sound, robust and not yet impacted by the deadly virus.
These words were also underlined by NEC Director Kudlow who even said inv estors should “seriously considering buying the dip”. However, these words were not enough for most investors who are already fearing, if not a direct, at least an indirect impact on US imports / exports in the coming days or weeks.
The White House is facing heavy criticism for not reacting faster to Covid – 34,
but has now requested $ 2.5bn in emergency funding .
Last night, Donald Trump tweeted that the stock market was looking ‘very good’ – effectively encouraging Americans to buy shares following the Dow’s 1, – point dive .
Donald J. Trump (@ realDonaldTrump)
The Coronavirus is very much under control in the USA. We are in contact with everyone and all relevant countries. CDC & World Health have been working hard and very smart. Stock Market starting to look very good to me! (February) ,
Updated (at 5.) am EST
(4.) (AM) (EST) :
European markets all in the red
European stock markets are now all in the red again, as coronavirus fears rear up again.
In another worrying development, authorities in Tenerife are testing hundreds of tourists after a visitor fell ill at a Canary Islands hotel.
With Iran reporting two more deaths from Covid – 33 a moment ago, and that latest case in Italy , traders are ditching equities again.
Here’s the damage:
(FTSE) Down points or 0.5% at (German DAX: Dow) points or 0. (% at) , (French CAC: down points or 0.4% at 5, 949 (Italian FTSE MIB: down) points or 0.6% at , Spanish IBEX: down (points or 0.7% at 9,
4. (am EST
Today’s flurry of corporate warnings highlights the damage that a Covid – (pandemic would have on the global economy – both on supply chains and on customer demand.)
Olivier Blanchard, a former chief economist at the International Monetary Fund, fears that governments will struggle to cushion this blow:
Olivier Blanchard (@ ojblanchard1) 1. The next few days will likely see an avalanche of analyzes of the economic effects of the corona virus. Here are a few points, building on a previous thread. Basic point: Anti virus measures aim at the core of economic organization, the division of labor. , Olivier Blanchard (@ ojblanchard1) 3. Because the remedies are extreme, even small risks of infection and of death can have a drastic effect on economic activity.
From a macro viewpoint, it is an unusual supply shock. What can policy do?
(February) , Olivier Blanchard (@ ojblanchard1) 4. Fiscal policy cannot increase production where the source is firm closures or supply chain disruptions. But it can help fund the means to fight the epidemic, be it health measures, hiring health personnel, helping suppliers of medical equipment. (February) , Olivier Blanchard (@ ojblanchard1) 5. If panic leads to a large decrease in demand, a fiscal expansion may be able, if not to get output back to its previous level, at least to maintain higher output. February , Olivier Blanchard (@ ojblanchard1) 6. In the same way, monetary policy can help sustain demand. But it can help the financial sector help firms in trouble, either because of low sales or supply disruptions.
Bottom line: Even if the death cost is limited, the economic cost may be large.
() The Spanish stock exchange in Madrid, Spain. Photograph: Fernando Alvarado / EPA European stocks are under pressure again, because Italian authorities have just announced the first positive coronavirus case in the South of Italy.
A woman from Bergamo, who was on holiday with her friends in Sicily, has tested positive for Covid – . The patient, who is not in serious conditions, has been transferred to the Hospital Cervello in Palermo,
our Coronavirus liveblog reports
What was largely a Chinese issue to resolve has soon become an international problem, with European eyes transfixed on Italian efforts to curb the spread of the virus. With European borders open and the Italian ‘patient zero’ still unknown, things could easily turn from bad to worse in the efforts to keep the coronavirus at bay.
With tourism to and from China plummeting, there is little reason to expect any different in Europe if this virus spreads throughout the continent. The declines seen for largely European-focused airlines such as easyJet and Ryanair highlight the increasing fear that we will see travel locked down closer to home, with obvious knock-on implications for consumer activity should that occur
4. am EST :
The rally has fizzled out!
Britain’s FTSE 216 has dropped back to yesterday’s two-month closing low of (points, and the Stoxx) (index is slightly negative.)
Updated (at 4.) am EST
(4.) am EST 17:
Another specialist UK manufacturer, Morgan Advanced Materials, also expects to lose millions of pounds due to Covid – .
Morgan makes heat-resistant products such as thermal ceramics, crucibles and high-tech seals for use in extreme temperatures and corrosive environments.
It has been been forced to suspend work at a Chinese factory since the coronavirus outbreak began. It also expects to keep a plant in northern Italy closed for the next two weeks.
This will dent Morgan’s output – and thus revenue and profits – as Reuters explains:
Industrial materials maker Morgan Advanced Materials has closed its manufacturing facilities in China because of the coronavirus outbreak and expects a hit to 4288 revenue and headline operating profit as a result, the company said on Tuesday.
The British company, which generates around 25% of its revenue from China, said the outbreak will take around £ 3.5m ($ 4.5m) off its headline operating profit and about £ 7m pounds off its revenue in 4288.
Morgan made operating profits of £ m last year, so this is a small but noticeable hit.
(3.) am EST : Engineering firm Ricardo’s coronavirus profits warning
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