Financial markets faced another disappointing day yesterday after growing virus concerns amongst the investing community caused the markets to plummet.
The Dow Jones Industrial Average lost close to 900 points, dropping over three percent to reach 27,081. The Nasdaq Stock Market, and the S&P 500 both dropped by three percent.
Elsewhere the FTSE 100 dropped roughly two percentage points reaching levels recorded last year, and Japan’s Nikkei 225 fell by more than three percent.
On Tuesday 25th of February, industries including airline, travel, and car manufacturers were dealt a heavy blow as Chinese supply chains face disruptions and delays due to widespread governmental lockdowns of factories and transport links as they try to contain the spread of Covid-19. The price of crude oil also dropped.
US health officials warn the virus could spread further
US health officials threw fuel on the fire after warning that the likelihood of new coronavirus cases could increase; this rattled the US financial markets.
On February 26, 2020, President Trump tweeted: ‘CDC and my Administration are doing a GREAT job of handling Coronavirus, including the very early closing of our borders to certain areas of the world. It was opposed by the Dems, “too soon”, but turned out to be the correct decision. No matter how well we do, however, the Democrats talking point is that we are doing badly. If the virus disappeared tomorrow, they would say we did a really poor, and even incompetent, job. Not fair, but it is what it is. So far, by the way, we have not had one death. Let’s keep it that way!’
On the other hand the Centers for Disease Control and Prevention said that it is only a matter of time before the virus spreads across parts of the United States. “Ultimately we expect we will see community spread in this country. These are things that people need to start thinking about now. We are asking the American public to prepare for the expectation that this might be bad,” the CDC’s director Dr. Nancy Messonier told reporters.
Yesterday Senator John Kennedy pressed the US Secretary of Homeland Security, Chad Wolf, for answers to questions regarding America’s readiness for the potential and imminent threat of the coronavirus. When asked about a vaccine for Covid-19, Mr. Wolf said that it is a matter of months before an antivirus can be developed.
But the number of infected patients outside China’s borders is escalating. Its slowly making its way across Europe with nearly 300 cases in Italy, 7 of which have lost their lives; and there are now confirmed cases in the UK, Switzerland, France and Germany.
There are now close to 60 confirmed cases in the US, but Washington has tried to dampen the fears and concern that the Coronavirus spread could throw a spanner in the works for the world’s largest economy.
US National Economic Council Director Larry Kudlow tried to appease growing concerns that the virus could overwhelm the country. During an interview on CNBC Mr. Kudlow said:
“Our public health people, who are spectacular and the best in the world, are preparing for any eventualities and that is exactly what they should do. They were ahead of the curve on the travel bans now they’re ahead of the curve on potential emergency plans. As far as the US is concerned, we have contained this. This is a human tragedy, particularly in China, with thousands of deaths. The business and economics side, I don’t think it’s going to be an economic tragedy at all there will be some stumbles, we’re looking at numbers, it’s a little iffy, we may have a clearer picture in the next two to three weeks but at the moment the numbers that we’re looking at on all these Federal Reserve regional ISMs, today’s consumer confidence number; there are no supply disruptions. The numbers are saying that the US is holding up nicely.”
Virus uncertainty rattles financial markets
There seems to be a disconnect between US health department and the Trump administration. President Trump along with Mr. Kudlow have insisted that Covid-19 has been contained in the US whereas health officials are arguing otherwise.
So, there seems to be a mix of opinions from the US government, which explains why the financial markets are so unsettled.
Some economists have forecast that the outbreak could reach its peak in the first quarter of the year, with economic growth finding its footing once again in the second quarter. Some analysts have suggested that the Covid-19 turmoil is transitory and is unlikely to cause a widespread economic recession.
Investors abandoned equities and turned to US Treasuries, which are commonly regarded as safe havens when global financial markets go through periods of high risk, volatility and uncertainty.