Chief Investment Strategist
Weekly podcast: Markets Uncut
As investors try to assess the implications of the coronavirus, listen to Richard’s assessment to see what we can learn from the SARS epidemic. Plus, will the Bank of England cut interest rates and are things looking brighter for the eurozone economy? Listen online below or download the transcript
Market overview: Alan McIntosh, Chief Investment Strategist
Global financial markets have been negatively impacted by the recent outbreak of the coronavirus, an infectious and potentially deadly respiratory disease. Thought to have originated in the Chinese city of Wuhan, there have been just under 3,000 confirmed cases, with 80 fatalities (at the time of writing.) There are obvious similarities with SARS, which broke out around seventeen years ago.
In November 2002, the SARS outbreak started in Guangdong province in China and by March 2003 had spread to Hong Kong and subsequently to 32 countries. Around 8,000 people were infected and roughly one in ten subsequently died.
Aside from the human toll, the economic impact was mainly on China, with an estimate hit to GDP of between 1-2 per cent. The rest of South-East Asia outside of Hong Kong was not so severely impacted, however, with a less than one per cent reduction to GDP. Stock markets were also hit. The Hong Kong market fell by 12% between November 2002 and May 2003, by which time the SARS virus had been contained. Global stocks fell by around 10% over this period, although the US invasion of Iraq in March 2003 undoubtedly had an additional effect on investor sentiment.
It is too early to tell the scale of any problems the current virus will cause. With the outbreak coinciding with the Chinese New Year, there are many people already travelling, which could exacerbate the spread of the disease. There is always the risk that markets over-react to the news as it unfolds, however, so it is worth remembering that global share prices bounced back sharply after the SARS virus had been contained.
Nearer to home, we have the Bank of England announcement on interest rates this Thursday. Markets are slightly tipping towards a quarter point reduction in base rate.
And then there is Friday……farewell then, EU – it’s been a blast.