Market update: coronavirus roils risk sentiment

Spread of the novel coronavirus outside of China raises risks to the global economy

Global equity and commodity markets sold-off sharply yesterday on reports of new COVID-19 cases.
The outbreak has already curtailed economic activity in China and threatens to influence other closely tied economies as the virus spreads.
A epidemic-induced slowdown in China’s economy, ~16% of global GDP, could have a more meaningful and lingering impact than the SARS outbreak in 2003, when China represented ~4% of global output.
While COVID-19 could become a pandemic that triggers a global recession, evidence and history suggests that the virus will have a transitory impact on the economy. Any deceleration in growth will likely dissipate as the outbreak is contained, resulting an extension of the business cycle beyond 2H20 amidst accommodative monetary and fiscal policy.

Published by drifinancial