Uncertainty has increased in the global stock market due to the spread of a new type of coronavirus. Trading on Asian sites closed for the second day in a row. So, on Tuesday, January 28, the Japanese Nikkei stock index fell 0.55% (to 23.215 points), the South Korean KOSPI - 3.09% (to 2176 points), and the Singapore Straits Times Index - 1.81% (to 3181 points). The exchanges of China and Hong Kong do not work in connection with the celebration of the New Year on the lunar calendar.

European stock exchanges are uncertainly trying to recover after falling more than 2% the day before. In the middle of Tuesday's torus, the French CAC 40 index grew by 0.51%, to 5893 points, the English FTSE 100 - by 0.49%, to 7448 points, the German DAX index - by 0.32%, to 13.247 points.

On the eve of the massive sale of securities affected the US stock market. On January 27, at the auction in the US, the Dow Jones industrial index sank 1.57% (to 28.535 points), the S&P 500 corporate index also fell by 1.57% (to 3243 points), and the high-tech NASDAQ lost 1.9% and fell to 9139 points.

“The reason for this reaction was market fear. Players are afraid that the epidemic will slow down the world's second economy - China. China accounts for 16.3% of global GDP today, so investors are very sensitive to such risks. Thus, a slowdown in China could turn into a drag on the entire global economy, which now already demonstrates the worst growth rate since the 2008 crisis, ”said Sergey Deineka, financial analyst with BCS Premier.

At the end of December 2019, authorities in the Chinese city of Wuhan reported an outbreak of a respiratory infection of unknown origin. January 9, the Central Television of China with reference to a group of specialists called the cause of the disease a new type of coronavirus. At that time, 15 confirmed cases of infection were detected.

To date, the number of infected has exceeded 4,500, 106 have died, and another 976 patients are in serious condition, the State Health Committee of the PRC said.

Cases of the disease are already registered in Beijing, Shanghai and other major cities of the country. At the same time, the virus began to spread outside of mainland China. The cases were recorded in the USA, Japan, South Korea, Canada, France, Australia, Germany, Singapore, Thailand, Hong Kong, Vietnam, Cambodia, Nepal, Taiwan and Macau.

“The situation reminds investors of SARS that raged in Southeast Asia in 2002-2003. Then the total economic damage amounted to $ 59 billion. For example, Hong Kong lost about $ 12 billion, or 7.6% of its GDP, ”Mikhail Kogan, head of the analytical research department of the Higher School of Financial Management, said in a conversation with RT.

According to RT leading analyst at QBF Oleg Bogdanov, investors are also alarmed by the information about the closure of kindergartens and schools in China, the closure of borders between cities of the country and the evacuation of various countries of their citizens from China. As expected, the current state of affairs in the future may result in a decline in business activity in the country, a decrease in world agricultural trade and a decrease in global commodity circulation.

Risk escape

The general panic in the stock markets is accompanied by a noticeable drop in oil prices. Over the past week, the cost of raw materials of the Brent benchmark brand has fallen by more than 10% and for the first time since October 2019, it is near the level of $ 57-58 per barrel. This is evidenced by the ICE exchange in London.

“Oil has traditionally responded with a marked decrease in major epidemiological threats. This is due to the fact that there are real risks of reducing passenger traffic, including due to quarantine measures. As a result, the demand for fuel is reduced, ”Sergey Deineka explained.

At the same time, analysts have noted a sharp increase in gold prices. The precious metal has risen to the highest level over the past three weeks and is trading near $ 1,580 per troy ounce. The last time such a price level could be observed in early January amid a worsening of relations between Iran and the United States. As Sergey Deineka explained, in times of uncertainty, investors begin to massively sell securities and actively buy gold as the most reliable means of saving money.

“In the near future, market participants will closely monitor the dynamics of the spread of the disease, statements by the Chinese authorities and representatives of the World Health Organization. If WHO raises the threat, stock market sales can only increase. At the same time, news about a slowdown in the spread of the virus may force investors to return to cautious purchases, ”Deineka added.

Recovery Course

At the auction on January 28, the Mosbirzhi index added 0.71% and rose to 3107 points. The Russian stock market is growing moderately after falling by 1.9% on Monday.

As Natalia Milchakova, deputy head of Alpari’s information and analytical center, told RT, Russian investors also reacted negatively to news about the spread of coronavirus in China. Meanwhile, the players remained optimistic amid a record inflow of foreign investment.

“To date, the inflow of foreign investment in Russia has exceeded the levels of the pre-sanction period and has become the highest since 2013. First of all, we are talking about long-term investments, ”Milchakova explained.

In general, the expert does not expect a serious deterioration in the situation on the Russian financial market in the near future. Thus, a possible decrease in demand for hydrocarbons in China will not affect the work of Russian companies.

“Many fear that China will reduce energy consumption due to the virus. However, this problem is unlikely to seriously affect Russia. We have already launched the Power of Siberia gas pipeline, and the contract sets specific supply volumes that the consumer is obligated to purchase at a pre-agreed price. In addition, even if oil demand in China decreases, Beijing will continue to buy it from Russia. The supply of Russian raw materials through the pipeline will cost China much cheaper than oil imports by tankers from other countries, ”Milchakova concluded.