Investor fears about the deadly coronavirus and its subsequent impact on the global economy seem to be easing. The virus has so far affected more than 20,000 people in China and has claimed 465 lives, per China’s National Health Commission. The United States had earlier declared the coronavirus a public health emergency while the WHO recognized the impact of the virus to be widespread, affecting countries with weaker health systems.
However, recent actions by Beijing to combat the virus’ impact on the economy and consequently stocks have been encouraging. The People’s Bank of China offered funds in the overnight market to the tune of $71 billion for the second successive day to alleviate the economic stress of containing the outbreak. The central bank particularly wanted to encourage lending to struggling business houses.
Adding to the positive note, fresh data shows that the domestic economy continues to be in good shape, thanks to a rebound in manufacturing activities. According to the Institute of Supply Management, its manufacturing index climbed to 50.9 in January from an upwardly revised 47.8 in December. The index scaled beyond the 50 mark, which separates expansion from contraction. Analysts, by the way, were expecting a reading of 48.5.
Strength in new orders, production and employment supported the gains. The gauge of new orders increased 4.4 points to 52 in January, the highest since July. One of the ISM survey respondents said that “our business is starting 2020 stronger than we finished 2019, as we saw a dramatic downturn in orders over the last four months of 2019.” Productions also turned positive, while employment in the manufacturing sector increased. The employment index hit 46.6 last month compared with 45.2 in the prior month.
Coming back to the coronavirus issue, let us admit that its concerns are overblown. This is because experts are pretty confident about containing the outbreak. Medical experts at Johns Hopkin have downplayed the threat from this particular type of coronavirus or the 2019-nCoV. Gabor Kelen, a medical doctor and director of the Johns Hopkins Office of Critical Event Preparedness and Response, recently said that “the immediate health risk from 2019-nCoV to the general public in the United States is thought to be low at this time.”
Moreover, coronavirus isn’t as deadly and contagious as Ebola, SARS and Middle East Respiratory Syndrome. All the previous outbreaks could have had disastrous effects on the global economy. However, they were contained before serious damage was done.
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