Markets Continue to Decline on Coronavirus Contagion
Global markets headed broadly lower on Monday, following a decline started last week that was compounded when new cases of the deadly coronavirus were discovered across the globe and the death toll climbed to 80. The World Health Organization (WHO) hasn’t yet declared the virus a global health emergency, but it has been watching the evolution closely and may reclassify the disease in coming days. Officials from the WHO will be meeting Chinese health officials this week in Beijing to better assess the situation.
The global selloff was prompted by concerns that the spread of the virus would bring international businesses to a slowdown, if not a halt. Travel from Wuhan has already been restricted, and tourists worldwide have changed or cancelled their plans due to contagion concerns, impacting the tourism industries from airlines to hotels. Casinos in Macao, many of which provide a majority of the revenue to U.S.-based chains like Wynn Resorts and Las Vegas Sands, have been especially hard hit, with these chains each losing more than 8 percent last week. Airlines have also been impacted, particularly United Airlines whose share price plummeted nearly 9 percent last week due to the popularity of its routes to Hong Kong and China. Hotels worldwide have also been ravaged due to the high demand from Chinese tourists who have opted not to travel.
Wuhan, the province where the virus originated, is a large industrial hub, responsible for the production of parts for smartphones, automobiles, and other products. Production may be slowed in the area, causing a rise in prices, or importers may fear these products, and may need to pause production until the crisis passes, which would limit supply in the markets. In the immediate term, however, oil prices have fallen consistently in the past few trading sessions, pressured by concerns that decreased travel and trade will decrease demand.
On the flip side, pharmaceutical companies and healthcare-related industries have the potential to see huge upsides from the virus, as they scramble to develop drugs and vaccines and to sell protective products such as gloves and masks.
Asian stock indexes were broadly lower on Monday afternoon, following a day of declines on Wall Street on Friday. China’s benchmarks were the hardest hit, with the Shenzhen Composite sinking 3.45 percent as of 3:17 p.m. HK/SIN, and the Shanghai Composite down 2.75 percent. Japan’s Nikkei 225 was down 2.03 percent, and South Korea’s Kospi edged down 0.93 percent. Australia’s ASX 200 managed to eke out 0.04 percent of gains, as did Hong Kong’s Hang Seng Index, which was up 0.15 percent.
On the currency markets, the dollar was lower against the yen as traders flocked to the safe-haven currency. The greenback eased 0.22 percent to 109.03. The euro was up 0.1 percent against the dollar, trading at $1.1034, while the pound was down 0.046 percent to $1.307.
Gold futures were higher on Monday, heading up 0.42 percent to $1,578.50 per ounce, hitting above two-week highs as traders showed preference for safe-haven assets. Silver futures advanced 0.43 percent to $18.19 per ounce.