It finally happened. After weeks in which global stocks were too busy notching up a string of record highs with only a fleeting glance towards the ongoing coronavirus outbreak, yesterday they hit the buffers after cases in South Korea and Italy surged, adding two more major economies to those at risk of widespread disruption. The Dow Jones closed over 1,000 points lower, nearly 3.6%, marking its worst day in over two years. The decline marks the third-largest daily point drop in its 124-year history. The S&P 500 and NASDAQ fared no better, being down 3.35% and 3.7%, while the VIX jumped a massive 47%. In Asia, South Korea's Kospi closed down nearly 4%, after it was reported cases of the virus surged, with the NIKKEI down 3.3%.
In Italy, the death toll from Europe’s biggest outbreak rose to seven with the number of new cases climbing to 220. In response to the surge in new cases, the southern European country has imposed a lockdown in much of its wealthy north to try to help curb the spread. The stock market was down nearly 6%, the biggest daily drop in almost four years.
Fears are also growing in the Middle East after Iran announced an outbreak in the Iranian shrine city of Qom. Qom, which is thought to be a hub of the disease, is the main pilgrimage route, which could infect Shia Muslim pilgrims. These make up the majority, admittedly small numbers, of those infected, in Kuwait, Bahrain, Iraq and Lebanon. Dr Mike Ryan, head of WHO's emergencies programme, said that the high death rate may reflect detection of only severe cases and not mild infections at the start of the outbreak. A WHO team is to arrive in Iran (and Italy) today, he added.
For markets as a whole, whilst there is uncertainty about the spread and therefore length of the outbreak, we can see volatility continuing going forward with headlines being the driving force. Until we get at least some inkling of clarity, hold on to your hats as it could be a very bumpy ride.
Alternatively, follow the advice of the leader of the free world. He tweeted ‘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!’