The Global Coronavirus Impact Could be Far Worse

Stock futures are under pressure.

Just yesterday, markets thought they got the “all clear,” as the number of coronavirus cases seemed to have flattened out. Euphoric investors sent markets near all-time highs.  Hard-hit stocks began to catch bids. Cruise stocks for example began to recover.

A day later, chaos resumed.  

Dow futures fell 200 points, as new China counting methods revealed that global cases are now above 60,300.  The Hubei province is now reporting 14,840 new cases as of today, as compared to 1,638 the day before. Hubei also reported another 242 deaths, which is more than double the 94 reported on Wednesday.

Numbers increased after health authorities in the Hubei province said they changed the way they tabulate case totals — “clinically diagnosed” cases now count toward the “confirmed case” count, resulting in the sudden surge among the latter, as reported by CNBC.

The Spread is Not Contained

Hundreds of infections have now been reported in more than two dozen countries, with a total of three deaths from Hong Kong, Japan, and the Philippines.

In the U.S., the CDC announced that an American evacuee from Wuhan, China has now been diagnosed, bringing the total number of U.S. cases to 14.  The World Health Organization (WHO) also said it was “too early to say the epidemic was slowing,” as noted by Reuters.

In addition, the CDC reports its preparing for the virus to have a greater impact in the U.S. outside of the 13 current cases.  According to Dr. Nancy Messonnier, the director of the CDC’s National Center for Immunization and Respiratory Diseases, the CDC is taking steps to prepare for the virus to “take a foothold in the U.S.,” as quoted by The Hill.  “At some point, we are likely to see community spread in the U.S. or other countries.”

Virus could Lower China’s GDP to 5%

The U.S.-China trade war lead China to post GDP growth of only 6.1% in 2019 —  the weakest on record for nearly three decades. Unfortunately, the coronavirus contagion could undoubtedly send it even lower.

For one, consumption and discretionary consumer spending could slip.

“When compared to the SARS outbreak – also part of the Coronavirus family – the now much increased contribution of consumer demand as a driver of growth means the current outbreak could have a greater economic impact than in 2003,” says Martin Petch, Vice President and Senior Credit Officer at Moody’s, as quoted by Forbes.

Two, the travel sector in China is taking a massive hit with some cities closed off.

Three, oil is being impacted.  “China is the undisputed leading importer of crude oil taking in an average of 14 million barrels per day (bpd). Decline in consumer demand, manufacturing activity and transportation could result in a drop of as much as 20-25% in daily crude oil imports totaling ~3 million bpd, at least for the first two quarters,” as also reported by Forbes.

With sizable distress, and a spreading virus, there’s plenty of uncertainty – which markets hate.  Take cover. Markets could face even more pressure.