The virus is spreading and is already having an economic impact on some countries.
By Oso Oseguera — with information from Morning Brew.
Markets have experienced rough days as coronavirus cases spiked outside of China. The S&P missed the red memo and headed straight for crimson, closing down on February 24th on 3.4% in its largest percentage drop since Feb. 2018.
But stocks are just one piece of the puzzle, and that pesky inverted yield curve is back and worrying economists.
New cases of the virus have rocked asset prices in Japan, South Korea, and Italy, as those nations and others have ratcheted up emergency efforts to contain the outbreak.
Asian stock markets continued to tank overnight, as South Korea’s Kospi dropped nearly 4%, Australia’s ASX fell by 2.3%, and Hong Kong’s Hang Seng declined by 1.8%. MSCI’s index of Asia-Pacific stocks outside Japan hits its lowest point since early February.
Currencies have also sold off, led by the Japanese yen and Korean won, which have fallen to their lowest levels against the dollar since May and September 2019, respectively, in the past week.
The euro clawed back some losses against the dollar after dropping to its lowest point versus the greenback since mid-May last week.
S&P 500 futures prices were lower by 1% ahead of markets opening after dropping by more than 1% on Friday.
South Korean President Moon Jae-in called for “emergency steps” on Sunday after the country reported more than 160 new cases of the coronavirus, a number which grew to 833 total infections this morning. The government raised the infectious disease alert to its highest level.
That followed Italy’s announcement of emergency measures—including quarantines for several northern towns—as confirmed cases spiked from three to 132 in a matter of days. It’s now thought to be near 200, making it the largest outbreak outside of Asia. Iran announced its first infections last week and said Monday it had confirmed 43 cases and 12 deaths.
Finance ministers and central bank governors of the world’s largest countries pledged to “enhance global risk monitoring” and warned the coronavirus posed a serious threat to global growth during their weekend meeting.
The group of G20 leaders said in their official communique that the virus was central to their discussions. IMF head Kristalina Georgieva revised down the organization’s 2020 growth forecast for China by 0.4% points to 5.6% along with an expected 0.1% point decline in global GDP because of the virus.
“The news flow from the weekend has changed the game somewhat, where the focus is much more on the threat of an outbreak outside of China,” Chris Weston, head of research at broker Pepperstone, told Reuters.
The WHO clarified yesterday that the coronavirus is not yet officially a pandemic, but cautiously added that “it is time to do everything you would do in preparing for a pandemic.” Per Oxford Economics data cited by the FT, if the virus escalates to pandemic levels it could cut global GDP by $1.1 trillion.