Monday, February 24, 2020
Major stock market futures are down precipitously at this hour in today’s pre-market, as new information related to the COVID-19 coronavirus exacerbates the perceived risk to human life and economic growth. The Dow is currently 800 points lower than Friday’s close, the Nasdaq is off 275 points and the S&P 500 -90. These follow overnight markets in Asia and Europe which also tumbled as the number of confirmed COVID-19 cases grows, particularly outside China.
Drastic quarantines and lockdowns in mainland China over the past month appear to have had some positive effect: though the number of confirmed cases grew by another 1000 as of yesterday, the growth of the virus spread has become more muted. Currently, more than 77K people in China have come down with the disease, with the Chinese death toll climbing above 2400.
But South Korea now has around 760 cases of COVID-19, most of which have been confirmed only recently. This is to say nothing of what the confirmed case rate might be in neighboring North Korea, where the government does not divulge such data to the outside world. In Iran, the city of Qom confirms 50 deaths to this point. And Italy — without any direct link to the Chinese mainland, reportedly — have seen coronavirus cases blossom: 152 citizens in this Western European country are now confirmed to have contracted COVID-19.
This is obviously taking a tragic toll on human life, but also has consequences for economic growth. The International Monetary Fund (IMF) expects the global economy to dim by 0.1% due to the work hours and delivery services lost to attempts to quarantine the virus. In China, growth is estimated to come in 0.4% light due to COVID-19. And this is based on known data we possess today; should the disease continue to affect regions around the world previously considered safe from harm, we only expect economic projections to worsen.
U.S. Treasury Secretary Steven Mnuchin says it’s too early to make this call, however; he advises market participants to remain cautious, but say we are still weeks away from having a clear idea of whether COVID-19 will have notable medium- to long-term ill effects on the U.S. and global economies. Of course, we’ve already seen Apple (AAPL - Free Report) and other companies guide lower on quarterly revenue estimates; clearly companies that do a substantial amount of business in China are expected to be most deeply affected.
Meanwhile, crude oil futures are down 3% on the latest coronavirus updates, while gold is surging 2% at this hour. As investment managers re-tool their portfolios toward more suitably risk-averse positions, we expect this near-term outlook to prevail.
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