Cold weather in the markets. World stock markets plunged into red on Monday as the spread of the coronavirus epidemic outside China accelerated, raising fears of major macroeconomic repercussions.
Wall Street tumbled, the Dow Jones experiencing its worst session in more than two years with a fall of 3.56%, the Nasdaq falling by 3.71% and the S&P 500 falling by 3.35%. European markets closed on losses of between 3% and more than 5%. The Paris Stock Exchange fell by 3.94%, London by 3.34%, Frankfurt by 4.01%, Milan by 5.43%, Zurich by 3.58% and Madrid by 4.07%. The EuroStoxx 50 index for the euro zone fell 4.01%.
Earlier in Asia, the Chinese stock markets ended the session in dispersed order, Hong Kong and Shanghai ending in the red while the Shenzhen Stock Exchange closed very slightly in the green.
The specter of a pandemic
"The market is concerned that the multiplication of cases outside of China does not translate into a global pandemic likely to have significant macroeconomic repercussions," commented to AFP Daniel Larrouturou, equity manager of Dôm Finance. “As long as we had the impression that the epidemic was confined to China, there was less reason to worry. Now that cases are increasing outside China, South Korea, Iran and now Italy, the markets are reassessing the possible macroeconomic impacts, "he added.
Two months after the appearance of the new coronavirus in central China, the epidemic accelerated across the globe on Monday, with reports rising sharply from South Korea to Iran, the two countries that count each the largest number of contamination cases and deaths outside of China.
Italy, which now has five dead, has become the first country in Europe to set up a cordon cordon around ten cities in the North. And five countries announced Monday the first cases of contamination: Afghanistan, Bahrain, Kuwait, Iraq and Oman.
The recovery "at risk"?
"First it was Iran, after Italy", so it "affects the Schengen area, which poses a real problem since it is an open area", estimated with AFP Alexandre Baradez , analyst at IG France. The world health organization also called on Monday the world to prepare for a "possible pandemic" of the new coronavirus, deeming "very worrying (...) the sudden increase" of these new cases outside of China.
Investors are having "difficulty putting a price on this risk," said Baradez, and that is what the market reflects on Monday. The director of the International Monetary Fund, Kristalina Georgieva, said on Sunday that "the Covid-19 virus, a global health emergency, has disrupted economic activity in China" and could "jeopardize" the recovery of the world economy. She said the impact of the virus on growth would be around 0.1 point.
A White House economist said on Monday that the disruption caused by the coronavirus epidemic in China would have an effect on the US economy, but the magnitude of the impact remains unclear. "As the publication of 2019 results comes to an end, the effects linked to the coronavirus could be more and more important on the publications of the first quarter and the alerts on results could be announced in many sectors by then", warned in a note Vincent Boy, analyst at IG France.
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