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Market comment 2020
#1
Quote:The comparison is, presumably, intended to warn long-term investors against panic. Fair enough, not panicking is a reasonable default position in most market circumstances. But, just as one wouldn’t expect stock market tips from an epidemiologist, so it’s ridiculous for City pundits to push the thesis, however vaguely, that the spread of one viral outbreak might be a bit like another. One suspects the scientists apply more rigour. Second, China is a very different place now than it was in 2003. Its economy is far larger and more connected with the rest of the world, so economic shocks could be magnified. Most City pundits make this point, but then inexplicably cling to the idea that the stock market response might be similar anyway. There’s no logic there. Third, the starting point of stock markets surely also matters. At the end of 2002, stock markets were still in a funk after the bursting of the dotcom bubble, but then began a long upwards march at the start of 2003, which coincided with the Iraq War. Today’s climate is different. We’re many years into a global bull market and valuations, at least in the west, are generally regarded as “stretched” by usual yardsticks.


Guessing how markets will react to coronavirus is a fool's errand | Nils Pratley | Business | The Guardian

Quote:The outbreak of severe acute respiratory syndrome (SARS) in 2003 knocked one to two percentage points off China’s GDP that year, which then cost one-quarter to one-third of a percentage point in global growth, according to estimates. The larger number of infections from the coronavirus suggests the impact could be more severe this time for both China and the world. What happens in China matters more than ever for the rest of us. Its share of the global economy has surged from 8% in 2002 to 19% today, and it’s now the world’s second largest economy.
 How the Coronavirus Epidemic Could Upend the Global Economy | Time

Quote:Financial markets may get their first sign of the effects of the viral outbreak on global supply chains when Chinese factories restart production on Monday. Most of China has been closed since late January in observance of the Lunar New Year, and government officials across China had ordered businesses to remain shut until Feb. 9, according to the South China Morning Post. Extended closures due to the deadly pathogen is expected to end, at least for some businesses, at the start of the coming week and their reopening will be acutely watched.
 
Investors brace for coronavirus shock as China factories poised to reopen Monday - MarketWatch
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#2
Quote:Japan said on Monday that its economy had shrunk at an annualized rate of 6.3 percent in the three months that ended in December, the worst contraction since mid-2014. The results predated the virus epidemic but were affected by a monthslong slump in Chinese demand for Japanese exports.

Officials had been optimistic that an easing of the effects of Typhoon Hagibis and the consumption tax increase would return the country to growth as the new year began. But then the coronavirus began its deadly spread in China, halting the lucrative flow of tourists from that country and further imperiling Japanese exports.
 Japan’s Economy Shrank Sharply. Now Comes the Coronavirus. - The New York Times
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#3
Quote:For businesspeople around the world, the new coronavirus that sprang from China is producing a severe case of cognitive dissonance. Their eyes are telling them things are bad: rising fatalities, history’s biggest quarantine, sealed international borders, broken supply chains, shuttered businesses. But economists are telling them the epidemic will lower China’s 2020 economic growth by just a couple tenths of a percentage point and global growth essentially not at all. So, which is it, a global crisis or a tempest in a Wuhan teapot? A lot hangs on the answer.
 
How the Coronavirus Could Impact Global Business - Bloomberg
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#4
I am picking up on all doom and gloom at the moment in the media and thus a market correction. There are lots of conspiracies out there regarding the origins of the virus. Check out Dr. Angela Rasmussen’s twitter feed. She is a virologist at Columbia university and has written a good account of its origins. Apple have announced that they expect a hit. I’m expecting a correction to the 200 ma but then a continuation of the norm. There has been only two deaths related to the disease from outside China so far. I’d say it’s a good time to get on to anti bacterial hand washing production companies.
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#5
Hi Charlie, it looks like it's on to the next stage where control is basically futile as it has now spread to countries much less prepared to deal with it like Iran and Lebanon..
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#6
Yes. SPy fell hard yesterday. SPY still above 200 ma but I expect this to fall further over the next few days ( at least to the 200ma). For me, the question now is whether it falls further still, which would suggest a bear market and a possible recession. I think it is very possible. There are just too many variables when a pandemic occurs. The cynic part of me wonders whether the origins of the virus were manufactured in a laboratory in order to create a market panic. I expect a ‘miraculous’ vaccine or cure may follow if this is the case. Although, I think it’s genuine.
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#7
Quote:While saying the immediate risk from the coronavirus in the United States remained low, another top CDC official, Dr. Anne Schuchat, said it was no longer a question of if the virus would become a global pandemic. “It’s a question of when and how many people will be infected.”

Italy’s tourist industry, which accounts for about 13% of its economy, fears a plunge amid travel warnings and restrictions on soccer matches, cinemas and theaters.
 U.S. braces for coronavirus spread as outbreaks worsen in Italy, Iran - Reuters

Quote:As Olivier Blanchard, senior fellow at the Washington-based Peterson Institute for International Economics, puts it in a series of tweets, “virus measures aim at the core of economic organization, the division of labor.” And because the steps taken by governments have to be extreme, they have the potential to pose a serious risk for economic activity. The disruption of supply chains, due to closed factories or exports coming to a standstill, could spread as fast as the virus itself through the global economy. From a macroeconomic viewpoint, Blanchard notes, what is not yet officially a pandemic is “an unusual supply shock.” Fiscal policy, the former International Monetary Fund chief economist says, would be of little help to fight a slump that is not due to a lack of demand.
 
Why the coronavirus outbreak could trigger a major supply shock - MarketWatch

Quote:Harvard epidemiologist Marc Lipsitch told The Wall Street Journal that "it's likely we'll see a global pandemic" of coronavirus, with 40 to 70 percent of the world's population likely to be infected this year. "What proportion of those will be symptomatic, I can't give a good number," added Lipsitch, who is the Director of the Center for Communicable Disease Dynamics at the Harvard T.H. Chan School of Public Health.  Two other experts have recently given similar estimates.
 
Harvard scientist: coronavirus pandemic likely will infect 40-70% of world this year | TheHill

Quote:The Diamond Princess cruise ship went from 10 cases of the new coronavirus to more than 690 over the course of its two-week quarantine and the testing that followed. Experts and officials have criticized the decision to keep people on the ship and many poor hygiene practices onboard. Here’s how the cruise ship ended up with more than half of all novel coronavirus cases outside China. For the latest case total, death toll, and travel information, see Business Insider’s live updates here.
 
How the 'failed' quarantine of the Diamond Princess cruise ship started with 10 coronavirus cases and ended with more than 690
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#8
(02-26-2020, 02:22 PM)Charlie Chaplain Wrote: Yes. SPy fell hard yesterday. SPY still above 200 ma but I expect this to fall further over the next few days ( at least to the 200ma). For me, the question now is whether it falls further still, which would suggest a bear market and a possible recession. I think it is very possible. There are just too many variables when a pandemic occurs. The cynic part of me wonders whether the origins of the virus were manufactured in a laboratory in order to create a market panic. I expect a ‘miraculous’ vaccine or cure may follow if this is the case. Although, I think it’s genuine.

I agree Charlie, I think a recession is quite likely
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#9
Quote:A worsening coronavirus outbreak reportedly could threaten shortages of about 150 prescription drugs, several of them with no alternatives. China’s role in supplying the ingredients used in medications means that decreased Chinese production capability amid the outbreaks could threaten supplies of the drugs, which include antibiotics, generics, and branded drugs, two sources familiar with a Food and Drug Administration (FDA) list of at-risk drugs told Axios.
 
Coronavirus outbreak could cause shortages of 150 drugs: report | TheHill

Quote:Super-spreading, where individual patients pass on an infection to large numbers of people, is a feature of nearly every outbreak. It is not their fault but can have a significant impact on how diseases spread. There are reports of super-spreading during the new coronavirus outbreak, which has centred on Wuhan, in China. Briton Steve Walsh, who had been in Singapore, has been linked to four cases in the UK, five in France and possibly one in Majorca.
 oronavirus super-spreaders: Why are they important? - BBC News

Quote:The fact that Japan, which does have a good health system, isn’t able to track disease propagation, is troubling. It raises concerns that that some, perhaps many, are vulnerable at such low viral loads that they are getting sick not via in-person contact but via contaminated surfaces (recall that the Journal of Hospital Infections found that coronaviruses can live as long as nine days on glass, metal, and plastic)... 

There are indications that suggest the outbreak may be tapering off, with the daily number of new cases in China beginning to decline. However, researchers have warned that it could rebound once Chinese residents return to work and school, and what spooked the markets Monday was a spike in coronavirus cases outside China.
 
3 Energy Sectors Most Threatened by the Coronavirus | naked capitalism
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#10
Quote:The world’s largest iPhone factory has offered workers free transport, meals and accomodation in an attempt to ease labour shortages resulting from the coronavirus Covid-19 outbreak. Foxconn Technology, which operates iPhone assembly plants in China, is also reportedly offering bonuses of up to $1,000 in its efforts to lure employees back to work, according to industry sources cited by Digitimes.
 
Coronavirus: World’s biggest iPhone factory offers workers $1,000 bonus and free meals to return to work | The Independent

Quote:Then came the outbreak of Covid-19, which compelled Hong Kong authorities to shut six of the city’s borders with the mainland. Average daily tourist arrivals plunged by 97% to 3,000 in early February from 200,000 a year earlier while many local residents have cut back on all but essential purchases, choking off retail demand. So spooked are commercial real estate landlords by the scale of the slowdown that some have begun providing rental relief to help their tenants weather the storm. Henderson Land Development, the city’s third-largest developer, offered to slash rent by 60% to help out retailers. Hong Kong’s toy billionaire Francis Choi Chee Ming offered to lop 44% off rents at a 15,000 sq ft space at Plaza 2000 in Causeway Bay, after Prada refused to pay HK$9 million in monthly charges.

Keith Wu Shiu-kee, CEO of Sunlight Real Estate Investment Trust, a unit of Henderson Land Development, believes the impact of the virus on retail sales is likely to be far worse than during the protests, noting that in the second half of 2019 at least some tourists from the mainland were still arriving. He estimates that the plunge in total retail sales this year will be “clearly double-digits,” he said. “Whether it is 30%, 40%, or 50%, remains to be seen.”
 Hong Kong’s Real Estate – Housing, Office & Retail Properties – Face “Tsunami-Like Shocks” | Wolf Street

Quote:To date, at least as far as the U.S. is concerned, the main impact of the disease has been on aggregate supply. The Fed’s interest-rate tool is designed to address aggregate demand. So the cause and the cure would appear, on the surface, to be incompatible. The Fed can’t produce parts for automobile manufacturers across the globe that are dependent on intermediate-goods imports from China. It can’t reopen factories in Hubei Province, the epicenter of the coronavirus outbreak. It can’t provide needed factory workers for plants in locked-down areas of China. And it can’t create alternate supply chains as a substitute for China’s role as manufacturer to the world.
 
Why the Fed can’t defend the economy against the coronavirus outbreak - MarketWatch
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