The spread of coronavirus remained the key market theme this week, despite Federal Reserve and Bank of England rate decisions. Confirmed cases have now surpassed 10000, the death toll surpassed 200, and the virus has continued to spread to new countries. Just this morning, both the UK and Russia confirmed cases.
The sense of international panic is escalating. Numerous airlines have cancelled flights to China. Numerous countries have sent airplanes to pick up stranded citizens who were stuck in China. A number of China’s neighbours have closed their borders.
Moreover, more cities and provinces within China extended the holiday period until at least the 10th of February. Schools and many businesses will all be closed even longer. Economists within the Chinese government have speculated that the economic disruption associated with the outbreak could shave north of 1% off Chinese GDP growth this year.
Last night, the World Health Organisation labelled the coronavirus outbreak as a Public Emergency of International Concern and global measures to contain the virus were stepped up globally. They refrained from calling for any travel or transport restriction on China – some have speculated there may have been some “arm-bending” going on behind the scenes”.
Things could be much worse than we know. According to an investigative report prepared by The Lancet, over 75,000 people could be infected in Wuhan alone.
In their baseline scenario, they see the likelihood that similar outbreaks could occur in Beijing, Shenzhen and several other massive Chinese cities. These cities, the report said, maybe only between 1-2 weeks behind Wuhan in terms of the extent of the outbreak.
The report warned that, given close transport links between many international and Chinese cities, similar self-sustaining outbreaks in major global cities could become inevitable in the absence of large-scale public health interventions and due to the virus’s ability to spread before symptoms occur in the infected.
Almost inevitably, if such a worst-case scenario does play out, this risk-off move is nowhere near finished. And we can kiss good-bye to that “global rebound” we have been talking about for most of the year so far.
Looking ahead to next week, you can almost guarantee that coronavirus will remain the predominant market theme.