Coronavirus first presented itself in December 2019 and has since reached 50 territories from its place of origin in Wuhan, China, including – Italy, Japan and Australia. Since its outbreak, the disease has generated a ripple of fear (rightfully so) which continues to cripple stock markets, disrupt travel and cause frenzy amongst pharmaceutical giants who scramble to create a vaccine.
The severity of the situation continues to increase as the number of cases from internal transmission grow. An increasing number of countries have banned travel to and from China, stock markets worldwide have taken a major hit and gold prices skyrocketed as people search for stability.
But before anything else is discussed: What is Coronavirus?
It is a pathogen known as Covid-19 which is of zoological origin. Transmitted through the air, it causes symptoms similar to those of common respiratory diseases but at varying levels of intensity. The incubation period ranges from 1 to 14 days with the average being 5 days. It is currently estimated that over 80,000 people are infected with a death rate of around 1-2 per cent.
While the percentage may not seem like a lot, compare it to the 0.06 to 0.1 percent mortality rate for the flu and suddenly everything is put into perspective.
Now that some background is established: What is going on with the stock markets?
The short answer is that people are spooked. On February 24th Milan’s market closed nearly 6 per cent lower and the UK’s FTSE-100 dropped 3.3 per cent, with the largest losers being travel companies. February 27th saw the S&P 500 index plunge to its worst single day loss since August 2011.
Efforts to contain the virus have put a strain on Chinese production lines with businesses remaining shut and workers in quarantine. A survey by the American Chamber of Commerce in Shanghai indicated the 78 per cent of companies do not have sufficient staff to run production. Oxford Economics has also reevaluated its projected growth for China stating:
‘In China, we expect the near-term impact to see Quarter 1 growth plunge to just 3.8 percent’.
The same push for containment is also hurting travel companies worldwide as restrictions are put into place. Not only has the number of flights been reduced, but people’s tendency to travel has also decreased. A study by AppsFlyer showed a 22 per cent drop in flight bookings to and from the Asia Pacific region.
The largest floating quarantine of the coronavirus outside China — The Diamond Princess ship— has not helped ease fears either.
Recently, Apple was the first company to clarify what the viral outbreak meant for its sales and supplies, with other companies such as MasterCard and Pfizer displaying the same uncertainties. This brings up a second question.
Why is President Donald Trump seemingly confident?
A large portion of his reelection campaign is tethered to showcasing a strong economy — something he directly links to the stock markets. The past week has seen the American president take measures to reassure citizens that the virus is under control and that the markets remain strong, all in a bid to reduce possible damage to his 2020 election campaign.
However, public health officials have been less optimistic. Dr. Nancy Messonnier, director of the National Center for Immunization and Respiratory Diseases argues:
‘It’s not so much of a question of if this will happen anymore, but rather more of a question of exactly when this will happen’.
The Coronavirus presents an unforeseen challenge and world leaders must come up with comprehensive strategies to mitigate the fallout, sooner rather than later. Predictions can be made and precautions can be taken but only time will tell the full story.