Sharp increase in Coronavirus infections has sparked fresh concerns that the virus is capable of causing more and severe economic damage.
Shares in the United States and Europe had suffered their biggest loses since mid-2016 amid fears the coronavirus was morphing into a pandemic that could cripple global supply chains. In South Korea, where coronavirus cases have surged, the hard-hit Kospi edged up 0.8 percent and helped MSCI’s broadest index of Asia-Pacific shares outside Japan fight back to flat.
Central banks across Asia have already been easing policy, while governments have promised large injections of fiscal stimulus, something Western countries might also have to consider.
“This is a world now where economies are so intertwined that it’s hard to know what the economic impact will be,” said Rodrigo Catril, a currency strategist at NAB.
“It’s certainly hard to see a catalyst that might stop the losses in the near term, though the market has moved aggressively to price in US rate cuts as early as June.”
Underlining the economic effects of the virus was a 3.5 percent drop in Apple Inc as data showed sales of smartphones in China tumbled by more than a third in January.
The coronavirus death toll climbed to seven in Italy on Monday and several Middle East countries were dealing with their first infections, feeding worries it could turn into a pandemic.
“If travel restrictions and supply-chain disruptions spread, the impact on global growth could be more widespread and longer-lasting,” said Jonas Goltermann at Capital Economics.
“While we still think that it would take a significant deterioration in the outlook for the US economy for policymakers to cut rates, they may feel compelled to do so if the virus spreads and leads to continued falls in the stock market and inversion of the Treasury yield curve.”
The coronavirus could cost the global economy more than $1tn in lost output if it turns into a pandemic, according to a leading economic forecaster.
Oxford Economics warned that the spread of the virus to regions outside Asia would knock 1.3% off global growth this year, the equivalent of $1.1tn in lost income.
The consultancy said its model of the global economy showed the virus was already having a “chilling effect” as factory closures in China spilled over to neighboring countries and major companies struggled to source components and finished goods from the east.
If the virus spreads beyond Asia and becomes a global pandemic, world GDP would drop $1.1tn, or 1.3% compared to the current projection. A $1.1tn decline would be the same as losing the entire annual output of Indonesia, the world’s 16th largest economy.
