Coronavirus: how markets woke up to the threat | FT


The financial markets are sick. The coronavirus that
originated in China is now dominating every
asset class in the world. So how bad is it? Well, I can’t sugarcoat
this one for you. It’s serious. This has been the worst
week for global stocks since the financial
crisis of 2008. The S&P 500, the main
US benchmark of stocks, has fallen by 10 per
cent in just a few days to mark its fastest correction
since the Great Depression. In Europe and the UK, if
anything, it’s even worse. This was definitely not
on investors’ radars at the start of this year. Broadly speaking,
investors figured that 2020 was going to be, well, meh. Nothing spectacular, but
nothing awful either. Trade tensions between the US
and China had simmered down. Global growth looked
OK, all pretty humdrum. In early January,
the virus started getting more coverage
and attention, but again, the thinking
was that it would be contained within China. And looking back at previous
epidemics like Sars, any damage to markets would
likely prove fleeting. Factory shutdowns were
expected to be brief. Investors were talking
about how to profit from a speedy bounceback. The turning point came
when the virus hit Italy. 10 towns were quarantined. Big events were cancelled. Manufacturing was disrupted. The illness started
hitting ski resorts. And suddenly, for money
managers in London and New York, this all felt closer to home. The market started
tumbling in earnest. The White House was clear. Buy the dip, officials said. Investors are not listening. Money managers are not
reacting to the human cost of this outbreak,
dreadful though it is. Instead, this is about
companies’ supply chains, about factories being unable
to operate, about bankruptcies, about planes not flying. Maybe this is no more serious an
illness than the seasonal flu. Maybe. But seasonal flu does
not ground aircraft. This is a big risk to growth. Europe’s leisure
and travel stocks are putting in their worst
performance since 9/11. The fear is evident not
just in the stock markets. The bond markets are on fire. Government bonds are
always in high demand when the going gets tough. And right now, US bonds are at a
record high with 10-year yields well under 1.2 per cent. It’s hard to overstate
how extreme that is. The really scary bit for
investors – how do we fix this? The usual medicine
to market wobbles, interest rate cuts
from central banks, is unlikely to do the
trick, although investors are anticipating them. It all goes to show how brutal a
shakeout can be when it pierces through the anaesthetic of a
decade of central bank support. Fear is the new greed.

20 thoughts on “Coronavirus: how markets woke up to the threat | FT

  1. At least there is almost a certainty that everything will bounce back to normal once the whole coronavirus cools down… hopefully soon !!

  2. well…there is no foreseeable future at this time. Even in Korea,
    the government is just keeping their position against the one cult religion not CHINA.
    Each government in the world just keep their position at their own interest not the greater good.
    We are just pawns in this game, not the dominators…sucks…

  3. COVID19 is much worse than seasonal flu. Seasonal flu does not result in a 15-20% complication rate, requiring hospitalisation. Seasonal flu does not put 3-5% of those infected into intensive care.

  4. Sorry Katie, but your analysis is wafer thin. It appears as if your understanding of global markets and the global economic infrastructure is as deep as it needs to be (@ 0:38: 2020 a "meh"?! – was unlikely). Correlation is not causation. Seems to me that the coronavirus pandemic is more a catalyst and not a singular cause of market volatility. Rather there also continue to be serious deficiencies in monetary policy (negative rates, QEinf), in the macroeconomic infrastructure (the diminishing (axiological) value of real commodities, alienating labour market policies), in the markets themselves (overinflated stock prices due to factors other than their underlying fundamentals), and in political patronage (continued support of failed economic polices and of self-serving elites). And of course, there are many other factors to be considered in a complex system. Nice top btw (genuinely meant 🙂

  5. It is more serious than the seasonal flu. Seasonal flu spread, disease and deaths can be prevented with seasonal vaccine and antiflu medicines, if bonchi and alveoli are infected by bacteria secondary to the influenza virus infection there are plenty of antibiotics to administer.

    SARS-CoV-2 doesn't have both a vaccine and drugs. It is more contagious than the seasonal flu, it produces more deaths. So stop comparing these two viruses.
    Seasonal flu has never pushed Chinese government to build two hospitals in 10 days to copy with the increased demand of health assistance.

  6. The so called experts/ Ceo were telling this off only few days ago….Always overlook until things are not going their way. Few expert and CEO still bragging,though! Ignorance is the new greed!

  7. Very interesting situation :
    I worry more than when I got
    married…
    * * *
    Thank You so much dear
    Katie Martin & FT
    for Your always faultlessly
    ideal job for us !

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